📘 Comprehensive Income-tax Guide – FY 2025-26 & AY 2026-27
(As amended by the Finance Act, 2025)
The Income-tax framework for Assessment Years 2025-26 and 2026-27 reflects the updated slab-wise tax rates, surcharge structure, cess, and special tax regimes for various categories of taxpayers. This consolidated guide covers Individuals, HUFs, AOPs, BOIs, Firms, LLPs, Companies, Co-operative Societies, and Local Authorities, along with the latest provisions relating to MAT, AMT, rebate under Section 87A, and concessional regimes under Sections 115BAC, 115BAA, 115BAB, 115BAD and 115BAE.
Its purpose is to provide a clear and reliable snapshot of the updated statutory tax structure.
🧍♂️🧍♀️ 1. Individuals, HUF, AOP, BOI – NEW TAX REGIME (Default)
(Section 115BAC – Revised)
✔ Tax Slabs – FY 2025-26
| Taxable Income (₹) | Tax Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
✔ Key Features
-
Standard Deduction: ₹75,000 for salaried individuals and pensioners
-
Family Pension Deduction: ₹15,000
-
Rebate u/s 87A: Tax payable becomes zero if taxable income (after deductions) is up to approx ₹12 lakh (with marginal relief)
-
Minimal exemptions & deductions allowed
❌ Major Deductions Not Allowed
-
Home Loan interest (self-occupied property)
-
Most allowances & exemptions
🧓 2. Individuals – OLD TAX REGIME (Optional)
Applicable only if opted for.
✔ Old Slabs (Non-Senior Individuals)
| Taxable Income (₹) | Tax Rate |
|---|---|
| 0 – 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
✔ Senior Citizens (60–80 Years)
| Income (₹) | Tax Rate |
|---|---|
| 0 – 3,00,000 | Nil |
| 3,00,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
✔ Super Senior Citizens (80+ Years)
| Income (₹) | Tax Rate |
|---|---|
| 0 – 5,00,000 | Nil |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
✔ Rebate u/s 87A
Tax = Zero if taxable income ≤ ₹5 lakh
🏢 3. Partnership Firms & LLPs
| Particular | Tax Rate |
|---|---|
| Income Tax | 30% |
| Surcharge | 12% if income > ₹1 crore |
| Cess | 4% on tax + surcharge |
| AMT (Alternate Minimum Tax) | 18.5% |
🏭 4. Domestic Companies
✔ Tax Rates for Companies
| Company Category | Tax Rate |
|---|---|
| Domestic company with turnover ≤ ₹400 crore | 25% |
| Other domestic companies | 30% |
| Companies opting 115BAA | 22% |
| New Manufacturing Companies u/s 115BAB | 15% |
✔ Surcharge for Companies
-
7% if income > ₹1 crore
-
12% if income > ₹10 crore
✔ Minimum Alternate Tax (MAT)
-
MAT @ 15% on book profits
-
Not applicable to companies opting 115BAA / 115BAB
🏘️ 5. Co-operative Societies
✔ Normal Rates
| Income (₹) | Tax Rate |
|---|---|
| 0 – 10,000 | 10% |
| 10,001 – 20,000 | 20% |
| Above 20,000 | 30% |
✔ Special Concessional Schemes
| Section | Tax Rate | Applicability |
|---|---|---|
| 115BAD | 22% | Co-ops opting for concessional tax |
| 115BAE | 15% | New manufacturing co-operatives |
🏛️ 6. Local Authorities
| Category | Tax Rate |
|---|---|
| Local Authority Income | 30% |
| Add: Surcharge & Cess | As applicable |
AMT applies if normal tax payable is below threshold.
💠 7. Surcharge & Cess (All Taxpayers)
✔ Individuals / HUF / AOP / BOI
-
Income > ₹50 lakh – ₹1 crore → 10% surcharge
-
Income > ₹1 crore – ₹2 crore → 15%
-
Income > ₹2 crore – ₹5 crore → 25%
-
Income above ₹5 crore → 37% (Old Regime only)
-
New Regime maximum surcharge capped at 25%
✔ Health & Education Cess
-
4% on tax + surcharge
🧮 8. Examples of Tax Calculations
👉 Example 1: Salaried Individual (New Regime)
Income: ₹10,00,000
Less Standard Deduction: ₹75,000
Taxable Income: ₹9,25,000
Tax Calculation:
-
0–4,00,000 → Nil
-
4–8 lakh → 5% = ₹20,000
-
8–9.25 lakh → 10% = ₹12,500
Total Tax: ₹32,500
Cess @4%: ₹1,300
Final Tax Payable: ₹33,800
👉 Example 2: Partnership Firm
Taxable Income: ₹75,00,000
Tax @30% = ₹22,50,000
Cess @4% = ₹90,000
Total Tax: ₹23,40,000
👉 Example 3: Company opting 115BAA
Taxable Income: ₹1,00,00,000
Tax @22% = ₹22,00,000
Surcharge @10% = ₹2,20,000
Cess @4% = ₹96,800
Total Tax: ₹25,16,800
Tax Calculation Examples
✔ Example 1: New Tax Regime
Income: ₹9,00,000
Tax = 5% on ₹3,00,000 + 10% on ₹2,00,000 = ₹55,000
Cess @ 4% → ₹2,200
📌 Total Tax Payable = ₹57,200
✔ Example 2: Old Tax Regime
Income after deductions: ₹9,00,000
Tax = 5% on ₹2,50,000 + 20% on ₹4,00,000 = ₹95,000
Cess @ 4% → ₹3,800
📌 Total Tax Payable = ₹98,800
🔍 Conclusion
The New Tax Regime is beneficial for taxpayers without major deductions, while the Old Tax Regime benefits individuals who maximise deductions.
Compare both regimes every year before filing ITR to reduce tax liability.
Comprehensive Notes: Income-Tax Structure FY 2025-26 (AY 2026-27)
- As per budget 2025, new basic exemption limit under new regime is ₹ 4 L.
- For salaried individuals under new regime: standard deduction ₹ 75,000 allowed (updated from earlier ₹50,000) — this increases take-home benefit.
- Under new regime, many of the typical deductions & exemptions (available under old regime) are not allowed — e.g. deductions under Sections 80C, 80D, 80E; HRA; certain allowances; home-loan interest (self-occupied property) etc.
- For many individuals, because of slab structure + standard deduction + rebate, income up to ₹ 12 L (or ~ ₹ 12.75 L for salaried after standard deduction) can effectively result in zero tax liability.
- Note: under new regime, the special “senior / super-senior exemption slabs” are not applicable. Tax rates are same for all ages.
- The choice: taxpayers (Individuals / HUF / AOP/BOI) can choose between old or new regime each year (subject to conditions) depending on whether deductions are beneficial or lower slab-rate is better.
2. Key Section — Section 115BAC & Its Implications
- Section 115BAC defines the new optional tax regime for individuals / HUFs (and some other non-company assessees).
- Key features under 115BAC:
- Lower slab rates as shown above.
- Most deductions/exemptions under old regime are disallowed (80C, 80D, HRA, housing loan interest for self-occupied property, etc.)
- A standard deduction of ₹ 75,000 is available to salaried taxpayers — which helps reduce taxable income.
- For those opting new regime, alternate minimum tax (AMT) provisions do not apply.
- If you have business income and opt for 115BAC, special rules apply and once you switch, there are limitations on switching back.
- Implication: New regime is simpler and beneficial for taxpayers without large deductions (e.g. salaried persons without house-loan interest, big investments under 80C, etc.). Old regime may still be better for those with deductions.
3. Surcharge, Cess & Rebate / Marginal Relief
- On tax (after normal computation), Surcharge may apply depending on total income for individuals / firms / companies / co-ops / local authorities
- Health & Education Cess @ 4% is applied on (tax + surcharge) for all categories.
- For some incomes (like capital gains under certain sections, dividend income, etc.), surcharge cap is lower (e.g. not higher slab).
- Under new regime, there is a rebate under Section 87A: for FY 2025-26, rebate up to ₹ 60,000 is available. This effectively makes income up to ₹ 12 L (before cess/surcharge) non-taxable for many individuals.
- “Marginal relief” rules apply for surcharge — to ensure surcharge doesn’t lead to disproportionately high tax when income slightly exceeds threshold.
4. Firms, LLPs, Local Authorities, Co-operative Societies & Companies
🏢 Domestic Companies (residential Indian companies)
- Regular corporate tax rate: 30%.
- If the company’s turnover / gross receipts (in relevant previous year) ≤ ₹ 400 crore — concessional tax rate: 25%.
- Special concessional regimes (optional) under:
- Section 115BA → 25% tax rate
- Section 115BAA → 22% rate (subject to conditions, mainly for “eligible domestic companies” that forego certain deductions/exemptions)
- Section 115BAB → 15% rate (for new manufacturing companies that satisfy prescribed conditions)
- For companies under 115BAA / 115BAB: surcharge is flat 10% (irrespective of total income amount).
- Cess (4%) applies on tax + surcharge.
- If normal computation gives very low tax vs “book profit,” then Minimum Alternate Tax (MAT) may apply — at 15% of book profit (plus surcharge & cess).
- BUT: MAT doesn’t apply for companies opting special regimes under 115BAA / 115BAB.
🧑🤝🧑 Firms / LLP / Local Authorities / AOPs / BOIs (non-companies)
- Taxed at 30% under normal (old) regime.
- Surcharge + cess applicable per slab rules.
- Alternate Minimum Tax (AMT) applies: if normal tax liability is less than 18.5% of “adjusted total income”, then AMT becomes payable.
- In case a firm/assessee is a unit in an International Financial Services Centre (IFSC) deriving income in convertible foreign exchange — reduced AMT rate: 9% (plus surcharge & cess as applicable).
🛠 Co-operative Societies
- Under general regime: taxed like firms — slab structure as per Act (but many co-ops choose special rate regime).
- Under special concessional regime via Section 115BAD or Section 115BAE — co-op can opt for 22% or 15% tax rate (as per eligibility).
- Surcharge: As per rules (for co-ops under special rate regime, surcharge + cess apply; generally surcharge may be 10% + cess).
5. What’s Changed / What’s Important for FY 2025-26
- New regime slab structure updated — basic exemption ₹ 4 L; slabs 5%,10%,15%,20%,25%,30% depending on income.
- For many individuals (especially salaried), with standard deduction + rebate, first ₹ 12 L (≈ ₹ 12.75 L for salaried) effectively becomes tax-free under new regime.
- New regime continues to disallow most deductions/exemptions — so individuals with significant deductions under 80C, 80D, home-loan etc. should compare carefully before choosing.
- For Corporate taxpayers, concessional special-rate regimes (115BA, 115BAA, 115BAB) remain relevant, especially for newer or smaller companies seeking lower tax. Income Tax Department+2Income Tax India+2
6. Decision Factors — Which Regime / Rate to Choose
Use the following flow/criteria to decide best regime:
If you are — | Likely Best Option |
Salaried / wages income, few/no investments, limited deductions | New regime (115BAC) — lower slabs + standard deduction + rebate |
Have large deductions (PPF/80C, medical insurance/80D, home-loan interest, HRA, etc.) | Old regime — take advantage of deductions/exemptions even with higher slab rates |
You run a small/medium domestic company (turnover ≤ ₹ 400 cr) or qualify for concessional rate | Opt for lower corporate rate (25% or special rate under 115BA / 115BAA / 115BAB) |
You are a firm / LLP / Co-op with minimal deductions — trading or rental income only | Evaluate normal 30% vs special co-op/firm rate — may benefit from special rate regime if eligible |
You have book profits but low taxable income (for companies) | Check MAT applicability — might pay higher via MAT if profits but low taxable income |
Special Tax Rates Applicable to Domestic Companies
Domestic companies in India may opt for regular taxation or concessional taxation regimes under different sections of the Income-tax Act. The applicable rates are as follows:
✔ Special Tax Options for Domestic Companies
Option Chosen Applicable Section Tax Rate Domestic company opting for concessional regime (first introduced for certain companies) Section 115BA 25% Domestic company opting for reduced corporate tax for general companies Section 115BAA 22% New domestic manufacturing companies meeting specified conditions Section 115BAB 15%
| Option Chosen | Applicable Section | Tax Rate |
|---|---|---|
| Domestic company opting for concessional regime (first introduced for certain companies) | Section 115BA | 25% |
| Domestic company opting for reduced corporate tax for general companies | Section 115BAA | 22% |
| New domestic manufacturing companies meeting specified conditions | Section 115BAB | 15% |
✔ Surcharge (Special Regime Companies – 115BAA & 115BAB)
A flat 10% surcharge applies irrespective of total income.
This simplifies the surcharge calculation for companies under these concessional regimes.
A flat 10% surcharge applies irrespective of total income.
This simplifies the surcharge calculation for companies under these concessional regimes.
✔ Health & Education Cess
Income-tax plus surcharge is subject to 4% Health & Education Cess.
Income-tax plus surcharge is subject to 4% Health & Education Cess.
✔ MAT Applicability
Companies opting for Section 115BAA or Section 115BAB are fully exempt from Minimum Alternate Tax (MAT).
However, companies opting for Section 115BA are NOT exempt from MAT and must apply MAT @ 15% of book profits wherever applicable.
Companies opting for Section 115BAA or Section 115BAB are fully exempt from Minimum Alternate Tax (MAT).
However, companies opting for Section 115BA are NOT exempt from MAT and must apply MAT @ 15% of book profits wherever applicable.
⭐ 5. Foreign Company — Tax Rates AY 2025-26 & AY 2026-27
Foreign companies are taxed in India based on the nature of income received or accrued in India.
✔ Tax Rates for Foreign Companies
Nature of Income Tax Rate Royalty or Fees for Technical Services from specified older agreements (approved by Central Government) 50% Any other taxable income 35%
| Nature of Income | Tax Rate |
|---|---|
| Royalty or Fees for Technical Services from specified older agreements (approved by Central Government) | 50% |
| Any other taxable income | 35% |
✔ Surcharge on Foreign Companies
Surcharge applies on the amount of income-tax as follows:
| Total Income | Surcharge Rate |
|---|---|
| Exceeds ₹1 crore but does not exceed ₹10 crore | 2% |
| Exceeds ₹10 crore | 5% |
Marginal Relief Conditions
Surcharge is restricted to ensure:
For income > ₹1 crore and ≤ ₹10 crore
⇒ Tax + surcharge should not exceed tax on exactly ₹1 crore by more than the excess income.For income > ₹10 crore
⇒ Tax + surcharge should not exceed tax on exactly ₹10 crore by more than the excess income.
✔ Health & Education Cess
Applied @ 4% on tax + surcharge.
Applied @ 4% on tax + surcharge.
✔ Minimum Alternate Tax (MAT) for Foreign Companies
Foreign companies are normally liable to MAT @ 15% of book profit, if:
Tax payable under normal provisions is less than 15% of book profit.
MAT Not Applicable If:
The foreign company does not have a Permanent Establishment (PE) in India, OR
It opts for presumptive taxation under
Section 44B / 44BB / 44BBA / 44BBB.
The foreign company does not have a Permanent Establishment (PE) in India, OR
It opts for presumptive taxation under
Section 44B / 44BB / 44BBA / 44BBB.
⭐ 6. Co-operative Society — Tax Rates AY 2025-26 & AY 2026-27
✔ Normal Tax Rates for Co-operative Societies
Taxable Income Tax Rate Up to ₹10,000 10% ₹10,001 – ₹20,000 20% Above ₹20,000 30%
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹10,000 | 10% |
| ₹10,001 – ₹20,000 | 20% |
| Above ₹20,000 | 30% |
✔ Surcharge for Co-operative Societies
Total Income Surcharge Rate Exceeds ₹1 crore but not ₹10 crore 7% Exceeds ₹10 crore 12%
| Total Income | Surcharge Rate |
|---|---|
| Exceeds ₹1 crore but not ₹10 crore | 7% |
| Exceeds ₹10 crore | 12% |
Marginal Relief Applicable
Surcharge is restricted such that:
Total tax payable does not exceed tax on the threshold slab (₹1 crore or ₹10 crore) by more than the income exceeding that threshold.
✔ Health & Education Cess
4% on tax + surcharge.
4% on tax + surcharge.
✔ Alternate Minimum Tax (AMT)
A co-operative society must pay AMT if normal tax is lower than:
15% of Adjusted Total Income
Reduced AMT Rate
For units located in International Financial Services Centres (IFSC) earning income solely in foreign exchange → AMT is 9%.
For units located in International Financial Services Centres (IFSC) earning income solely in foreign exchange → AMT is 9%.
⭐ 6.1 Alternative Tax Regime for Co-operative Societies
The Income-tax Act provides concessional tax regimes for co-operative societies subject to conditions.
✔ Section 115BAE — New Manufacturing Co-operatives
Conditions:
Registered on or after 01-04-2023
Engaged in manufacture or production
Must commence manufacturing on or before 31-03-2024
Must not claim specified deductions/exemptions
Tax Rate:
15% on income from manufacturing activities
✔ Section 115BAD — Optional Concessional Tax Regime
Tax Rate:
22% (subject to prescribed conditions)
✔ Surcharge & Cess under Special Regimes
Surcharge: 10% (flat)
Health & Education Cess: 4% on tax + surcharge
Surcharge: 10% (flat)
Health & Education Cess: 4% on tax + surcharge
AMT Not Applicable
If a society opts for 115BAE or 115BAD, then:
AMT provisions do not apply
AMT credit and carry forward also not applicable
📘 Summary Note
This enhanced compilation provides a structured overview of income-tax rates applicable to domestic companies, foreign companies, and co-operative societies for AY 2025-26 and AY 2026-27.
It helps taxpayers, professionals, and businesses quickly identify the correct tax rate, surcharge applicability, cess calculations, MAT/AMT rules, and optional concessional regimes.
Understanding these rules ensures:
Proper tax planning
Better compliance
Avoidance of unintended tax exposure
❓ 9. Frequently Asked Questions (FAQ)
Q1. What is the basic exemption limit under the New Regime?
Under the new regime, income up to ₹4,00,000 is tax-free.
Q2. What is the standard deduction in the New Regime?
Salaried individuals and pensioners get a ₹75,000 standard deduction.
Q3. Can I still use 80C and HRA in the New Regime?
No. Most deductions and exemptions are not allowed under the new regime.
Q4. Who should choose the Old Regime?
Those claiming high deductions like HRA, 80C, 80D, home loan interest, etc.
Q5. What is the 115BAB rate for new manufacturing companies?
15% basic tax rate + applicable surcharge & cess.
Q6. What is the rebate limit under the New Regime?
Tax becomes zero if taxable income is up to approximately ₹12 lakh due to Section 87A + marginal relief.
Q7. Is MAT applicable to companies opting 115BAA / 115BAB?
No. MAT is not applicable to companies under these concessional regimes.
📝 Disclaimer
This article is prepared for general informational and educational purposes only. Although every effort has been made to provide accurate and updated tax information, the rates, provisions, and rules are subject to amendments and official notifications. Readers should verify facts with the latest government publications or consult a qualified tax professional before making financial or tax-related decisions.
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