Income Tax Rates In India for Financial Year 2025-26

Published Sat, 31 May 2025 | Updated Sat, 31 May 2025 Income Tax

India has a progressive method of taxation i.e. higher taxes for higher income. The tax rates are decided based on residential status of person, type of taxable person, nature and quantum of income. We have summarized below the applicable tax rate for different type of persons for Financial Year 2025-26.

A.    Tax Rates for Individuals/HUFs

Option–I   With all Available Exemptions (Old Tax Regime)

Tax Rates applicable for Individuals/ HUF (including Non-Resident individuals) for Financial Year 25-26)
Total  Income		Rates of Income Tax
S. No.	Total Income	Individual (Age less than 60 Years)/HUFs	Senior Citizen (Age 60-80 Years)	Super Senior Citizen (Age-80 Years or above)
1	Up to Rs.2,50,000	Nil	Nil	Nil
2	Rs.2,50,000 to Rs.3,00,000	5%	Nil	Nil
3	Rs.3,00,000 to Rs.5,00,000	5%	5%	Nil
4	Rs.5,00,000 to Rs.10,00,000	20%	20%	20%
5	Above Rs.10,00,000	30%	30%	30%

OR

Option 2: Under section 115BAC of the Act (without certain deductions/exemptions) (Default Tax Regime) 

Tax Rates applicable for Individuals/ HUF (including Non-Resident individuals) for Financial Year 2025-26
Total  Income		Rates of Income Tax
S. No.	Total Income	Individual (Age less than 60 Years)/HUFs	Senior Citizen (Age 60 Years or above)	Super Senior Citizen (Age 80 Years or above)
1	Up to ₹4,00,000	Nil	Nil	Nil
2	₹4,00,000 to ₹8,00,000	5%	5%	5%
3	₹8,00,000 to ₹12,00,000	10%	10%	10%
4	₹12,00,000 to ₹16,00,000	15%	15%	15%
5	₹16,00,000 to ₹20,00,000	20%	20%	20%
6	₹20,00,000 to ₹24,00,000	25%	25%	25%
7	Above ₹24,00,000	30%	30%	30%

 

Rebate u/s 87A

Persons having a total income of less than INR 12,00,000 shall be eligible for the benefit of rebate under Section 87A of the Act for an amount up to INR 60,000. Accordingly, there will not be any tax liability for the assessee having income up to INR 12,00,000 under Option- 2.  However, rebate under section 87A is not avaliable in the tax on income chargeable at special rates.

Further persons exercising Option -1 having a total income of less than INR 5,00,000 shall be eligible for the benefit of rebate under Section 87A of the Act for an amount up to INR 12,500.

Exemptions Not Available in Option- 2

In case the assessee opts for Option-2, certain exemptions/deduction (such as LTA, HRA, Interest on housing loan, and deduction under section 80) shall not be available except followings:

• A standard deduction of Rs. 75,000 will be allowed to salaried employees.

• Salaried individuals are allowed a deduction of the contributions made by the employer towards the National Pension Scheme during the computation of his total income provided total deduction shall not exceed 14% of their salary. (Section 80CCD(2))

• Businesses can still claim depreciation on assets, including buildings, machinery, and equipment, as per Section 32. However, additional depreciation of 20% on new plant and machinery (which was earlier available to manufacturing entities) is not allowed.

• Deduction in respect of additional employee cost incurred for employment of new employees is allowed. Deduction is available for 3 assessment years starting from the year in which the employment is provided. (Section 80JJAA).

• Deduction under section 80LA shall also be available in case of a person, having a Unit in the International Financial Services Centre with respect to the income from its business for which it has been approved for setting up in such a Centre in a Special Economic Zone for 10 consecutive AYs out of 15 years beginning with the AY in which permission has been obtained and has exercised the option under section 115BAC only if Assessee furnishes along with return of Income, a report of Chartered Accountant in Form No. 10CCF, certifying that deduction has been correctly claimed in accordance with the provisions of the section.

Additional conditions in relation to option 2

Any carried forward losses or unabsorbed additional depreciation, if any, cannot be set off against current income or carried forward to future years if such loss is attributable to any of the deductions not allowed under the option -2 (Section 115BAC). This means that losses linked to previously claimed deductions under the old regime will lapse if the taxpayer opts for the new tax regime, ensuring a clean transition without past benefits influencing future tax computations.

Surcharge Applicable to the Individuals/HUF: -

Income limit	Rate of surcharge*
Total income exceeds Rs 50 lakh but doesn’t exceed Rs 1 crore	10%
Total income above Rs 1 crore but doesn’t exceed Rs 2 crore	15%
Total income exceeds Rs 2 crore	25%

 

 

 

 

 

*if total income includes any dividend income, income chargeable u/s 111A, 112A and 112, the rate of surcharge on the amount of Income tax computed on that part of income shall not exceed 15%.

Moreover, surcharge is subject to a marginal relief (in order to ensure that increase in tax should in no case be more than increase in income).

Income Chargeable at Special rates: -

Further, there are various incomes which are taxable at special rates. These incomes are taxable at same rate under both new tax regime and old tax regime.

Income	Income Tax Rate
Long Term Capital Gain u/s 112A	12.5%
Long Term Capital Gain u/s 112	12.5% (Without Indexation)
Short Term Capital Gain u/s 111A	20%
Casual Income	30%

Note: The concessional rate (Option 2) will be default tax regime unless Option-1 (Old tax regime) is exercised by the individual/HUF in the prescribed manner on or before the time specified.

B. Income Tax Slab for Partnership Firm/ LLP

Income of Partnership firms/LLP is taxable @ 30%.

Important points to be consider for taxation of Firm/LLP

• Surcharge @ 12% will be applicable if total income of the firm/ LLP or Local authority exceeds Rs. 1 crore.
• Heath & Education Cess @ 4% shall be applicable on above tax rates
• The benefit of rebate u/s 87A is not available partnership firm/LLP.
• Marginal relief to be checked in order to ensure that increase in tax should in no case be more than increase in income.

C. Tax Rates for Companies

C.1 Tax Rates for Domestic Companies  

Domestic Company means an Indian Company or any other Company which in respect of its income liable to taxed in India and has made the prescribed adjustments for the declaration and payment of dividend within India. 

The corporate tax rate for domestic companies is as below:       

Income	Domestic Company with turnover less than 400Cr in previous year 2020-21	Domestic Company with turnover of 400Cr or more in previous year 2020-21
Total Income less than 1 Crore in current year	25% plus cess 4%	30% plus cess 4%
Total income more than 1 Crore but less than 10 Crore in current year	25% plus surcharge of 7% plus cess 4%	30% plus surcharge of 7% plus cess 4%
Total income more than 10 Crore in current year	25% plus surcharge of 12% plus cess 4%	30% plus surcharge of 12% plus cess 4%

Further domestic companies have following options for lower tax rates subject to satisfaction of prescribed conditions:

Type of company	Tax Rate
All domestic companies u/s 115BAA without availing prescribed deduction/exemption	22 % plus surcharge of 10 % and cess of 4 %, thus effective tax rate of 25.17 % irrespective of amount of income
Manufacturing companies incorporated on or after 1st October 2019 u/s 115BAB (without availment of prescribed deductions/exemption)	15 % plus surcharge of 10 % and cess of 4 %, thus effective tax rate of 17.16 % irrespective of amount of income

Further, provisions relating to MAT/ AMT shall not apply to the companies opting for concessional rates of tax.

C.2      Tax rates for foreign companies

As per income tax law, Foreign Company is a company which is not a domestic company as defined ie. the Company which is registered outside India. A foreign Company can become a domestic company if it makes arrangement for declaration & payment of dividend in India. Following are the applicable tax rates for foreign companies: 

Type of Income	Income upto Rs. 1 Crore	Income of more than Rs 1 Crore and upto Rs 10 crore	Income of more than Rs 10 Crore
Royalty received from Government or an Indian concern or fees for rendering technical services where such agreement has, in either case, been approved by the Central Government after the date of March 31, 1961 but before April1,1976.	50% plus cess of 4%	50% plus surcharge of 2% plus cess of 4%	50% plus surcharge of 5% plus cess of 4%
Any other income	35% plus cess of 4%	35% plus surcharge of 2% plus cess of 4%	35% plus surcharge of 5% plus cess of 4%

 

D. Tax rates for Cooperative Societies

Income	Income Tax Rate
Upto 10,000	10%
10,001 to 20,000	20%
Above 20,000	30%

*Further, surcharge shall be levied @ 7% if total income Exceed Rs.1 Crore but less than Rs.10 Crore and 12% if  total income Exceed Rs.10 Core.

Under new tax regime cooperative societies resident in India may pay tax at the rate of 22% for AY 2021-22 onwards in respect of its total income subject to complying certain conditions under section 115BAD. Surcharge shall be applicable @ 10% for Cooperative Society opting for this option. Further cess of 4% will also be applicable. The Option so exercised cannot be withdrawn. Further, following deductions/ exemptions would not be available:

• Deductions u/s 10AA or depreciation u/s 32(1) (iia) or section 32AD or section 33AB or section 33ABA or section 35(2AA) or section 35AD or section 35CCC or under any provisions of chapter VI-A other than section 80JJAA.
• Without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in (a) above; and
• No further deduction of loss or depreciation shall be provided for any subsequent year.
• The concessional rate shall not apply unless option is exercised by the co-operative society in the prescribed manner on or before the due date specified under sub-section (1) of section 139 of the Act for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after 1st April, 2021 and such option once exercised shall apply to subsequent assessment years.
• If the person has a Unit in the International Financial Services Centre (IFSC), as referred to in sub-section (1A) of section 80LA, the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in that section; and 
• The option so exercised cannot be withdrawn.

Further, provisions relating to MAT/ AMT shall not apply to the Cooperative Societies opting for concessional rates of tax.

 

 

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