Description

Central Govt Employee – Income Tax Calculation Fy 2025-26

For the Financial Year (FY) 2025-26, Central Government employees can choose between the New Tax Regime (default option with lower rates and fewer deductions) and the Old Tax Regime (higher rates with many exemptions and deductions like HRA, LTA, 80C, 80D, etc.). The final tax liability depends on which regime provides more benefits based on an individual’s specific income and investments.

• New Regime is Default: The new tax regime is the default option; employees must explicitly opt for the old regime, usually by informing their employer.
• Enhanced Tax-Free Limit (New Regime): For salaried individuals, income up to ₹12.75 lakh can be effectively tax-free in the new regime due to a basic exemption limit of ₹4 lakh, a standard deduction of ₹75,000, and an enhanced Section 87A rebate of up to ₹60,000.
• Standard Deduction (New Regime): A standard deduction of ₹75,000 is available to salaried individuals and pensioners under the new regime.
• Old Regime Limits Unchanged: The basic exemption limits and standard deduction of ₹50,000 under the old regime remain unchanged.