Complete Income Tax Guide for FY 2025-26 (AY 2026-27): Slabs for Individuals, Companies, HUF, and More
Navigating India's income tax structure can be complex, with different rules for individuals, companies, and other entities. This guide breaks down the tax slabs, rates, and key provisions for the Financial Year 2025-26 (Assessment Year 2026-27) in a simple format, complete with examples.
New Income Tax Slab Rates for FY 2025-26 (AY 2026-27)
📊 Part 1: Income Tax Slabs for Individuals & HUFs
For Individuals and Hindu Undivided Families (HUFs), the tax system offers a choice between the Old Regime and the New Regime. The New Regime is now the default option.
New Tax Regime (Default from FY 2025-26)
This regime offers lower tax rates but comes with very few deductions and exemptions.
| Income Tax Slab (₹) | Tax Rate for FY 2025-26 | Tax Payable (Cumulative) |
|---|---|---|
| Up to 4,00,000 | 0% | Nil |
| 4,00,001 to 8,00,000 | 5% | 5% of income above ₹4 Lakh |
| 8,00,001 to 12,00,000 | 10% | ₹20,000 + 10% of income above ₹8 Lakh |
| 12,00,001 to 16,00,000 | 15% | ₹60,000 + 15% of income above ₹12 Lakh |
| 16,00,001 to 20,00,000 | 20% | ₹1,20,000 + 20% of income above ₹16 Lakh |
| 20,00,001 to 24,00,000 | 25% | ₹2,00,000 + 25% of income above ₹20 Lakh |
| Above 24,00,000 | 30% | ₹3,00,000 + 30% of income above ₹24 Lakh |
✅ Key Rebate (Section 87A): Under the new regime, individuals with a total taxable income up to ₹12 lakh are eligible for a rebate, making their total tax liability Zero. This rebate is not available for incomes taxed at special rates.
Old Tax Regime (Can be Chosen Opt-In)
This regime allows numerous deductions (like under Sections 80C, 80D, HRA) but has higher tax rates for some slabs.
| Income Tax Slab (₹) | Tax Rate for FY 2025-26 |
|---|---|
| Up to 2,50,000 | 0% |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Note: Surcharge and Health & Education Cess apply as per rules.
Example for an Individual (New Regime):
Let's calculate the tax for a salaried person with a gross income of ₹15,00,000.
Gross Income: ₹15,00,000
Less: Standard Deduction: ₹75,000
Taxable Income: ₹14,25,000
Tax Calculation:
On first ₹4 lakh: ₹0
On next ₹4 lakh: 5% of ₹4,00,000 = ₹20,000
On next ₹4 lakh: 10% of ₹4,00,000 = ₹40,000
On remaining ₹2.25 lakh: 15% of ₹2,25,000 = ₹33,750
Tax before Cess: ₹20,000 + ₹40,000 + ₹33,750 = ₹93,750
Add: Health & Education Cess @ 4%: ₹3,750
Total Tax Liability: ₹97,500
🏢 Part 2: Tax Rates for Companies, Firms, LLPs & Other Entities
Unlike individuals, companies and firms are taxed at flat rates. However, the effective rate includes surcharge and cess.
| Taxpayer Type / Condition | Standard Base Tax Rate | Effective Tax Rate (Approx.)* | Key Notes |
|---|---|---|---|
| Domestic Company (Turnover ≤ ₹400 Cr in FY 2023-24) | 25% | 26.00% - 29.12% | Rate depends on total income; surcharge applies. |
| Domestic Company (Others) | 30% | 31.20% - 34.94% | Applies if turnover exceeded ₹400 Cr or if 25% rate not opted. |
| Foreign Company | 40% | 41.60% - 43.68% | Surcharge for non-resident companies is lower (0%/2%/5%). |
| Partnership Firm / LLP | 30% | ~31.2% - ~34.94% | Taxed at a flat rate, similar to domestic companies. |
| Local Authority | 30% | ~31.2% | Taxed at a flat rate of 30%. |
| Co-operative Society | Slab Rates | As per slabs | Taxed at individual/HUF-like slab rates. |
*Effective Tax Rate includes Surcharge (based on income level) and Health & Education Cess @ 4%. Surcharge slabs for companies: 7% for income > ₹1 Cr, 12% for income > ₹10 Cr.
Special Concessional Regimes for Domestic Companies:
Section 115BAA: An optional 22% tax rate (effective ~25.17%) if the company forgoes specified deductions/exemptions.
Section 115BAB: An optional 15% tax rate (effective ~17.16%) for new domestic manufacturing companies set up after Oct 1, 2019.
🔑 Part 3: Key Components of Tax Calculation
Your final tax liability is not just the slab rate. Here are the other components that apply:
| Component | What is it? | Applicability & Rate |
|---|---|---|
| Standard Deduction | A flat deduction from salary/pension income. | ₹75,000 for salaried individuals & pensioners (both regimes). |
| Rebate u/s 87A | A direct reduction of tax for lower-income individuals. | Up to ₹60,000. Makes tax Zero if income ≤ ₹12 Lakh (New Regime). |
| Surcharge | An additional tax on the "high net-worth" income bracket. | For Individuals/HUF: 10%-37% on income > ₹50 Lakh. For Companies: 7%-12% on income > ₹1 Cr. |
| Health & Education Cess | A levy to fund health and education initiatives. | 4% on the total of Income Tax + Surcharge. |
💡 Choosing Between Regimes (For Individuals/HUF)
Choose the New Regime if: You have a simple income structure with few investments eligible for deduction (like 80C, 80D), or if your income is below ₹12 lakh (for zero tax liability).
Choose the Old Regime if: You make significant investments in PPF, ELSS, pay home loan interest, have high HRA, or pay substantial medical insurance premiums. The deductions can lower your taxable income considerably.
⚠️ Important Disclaimer
This blog post is for general informational purposes only based on the Finance Act and relevant rules. Tax laws are complex and subject to change. This is not professional tax advice. Please consult a qualified Chartered Accountant or tax advisor for advice tailored to your specific financial situation before filing your return.