How Much Income is Tax Free in India (2025–26)?
Every taxpayer in India wants to know one simple thing at the start of a financial year: “How much income is tax free?”. With multiple changes in recent budgets, the answer depends on whether you choose the Old Tax Regime or the New Tax Regime. In this detailed guide, we break down both systems, exemptions, deductions, and provide real-life examples to help you understand your tax-free income for the FY 2025–26 (AY 2026–27).
Basic Tax-Free Limit in India
The tax-free income in India starts with the basic exemption limit. This is the minimum income level up to which no tax is payable.
Old Tax Regime (2025–26)
- Up to ₹2.5 lakh – No tax (for individuals below 60 years)
- Up to ₹3 lakh – No tax (for Senior Citizens aged 60–80 years)
- Up to ₹5 lakh – No tax (for Super Senior Citizens aged 80+ years)
New Tax Regime (2025–26)
Under the revised new regime, the basic exemption limit is ₹3 lakh for all taxpayers irrespective of age.
The Role of Section 87A Rebate
The Section 87A rebate ensures that individuals with income up to a certain level pay zero tax.
- Old Regime – If total income (after deductions) is up to ₹5 lakh, no tax is payable.
- New Regime – If total income (after deductions) is up to ₹7 lakh, no tax is payable.
Comparison of Tax-Free Income
| Category | Old Regime | New Regime |
|---|---|---|
| Basic Exemption Limit | ₹2.5 lakh (general), ₹3 lakh (senior), ₹5 lakh (super senior) | ₹3 lakh (all) |
| Tax-Free Income with Rebate | Up to ₹5 lakh | Up to ₹7 lakh |
Can You Earn More Tax-Free with Deductions?
Yes! Especially under the Old Regime. By using deductions like Section 80C (₹1.5 lakh), 80D (Health Insurance), HRA, and others, you can reduce your taxable income further.
Example 1: Old Regime
Rohit earns ₹7.5 lakh annually. He invests ₹1.5 lakh in PPF (80C) and pays ₹25,000 as health insurance premium (80D). His taxable income reduces to ₹5.75 lakh. After rebate under 87A, he pays zero tax.
Example 2: New Regime
Priya earns ₹6.5 lakh annually with no deductions. Under the new regime, she gets the rebate under 87A and pays zero tax.
Old Regime vs New Regime – Which is Better?
- Old Regime: Better for people with higher deductions (like HRA, 80C, 80D, home loan interest).
- New Regime: Better for salaried individuals with limited deductions.
Smart Strategies to Stay Tax-Free
- Invest in PPF, ELSS, NPS, or life insurance (Section 80C).
- Buy health insurance for extra deduction (80D).
- Use HRA and home loan interest benefits.
- Opt for the regime (old or new) that reduces your final liability the most.
Frequently Asked Questions
1. How much income is tax free in India in 2025–26?
Up to ₹5 lakh under the old regime and ₹7 lakh under the new regime (including rebate).
2. Is PF contribution tax-free?
Yes, PF contributions are tax-free under Section 80C up to ₹1.5 lakh annually.
3. Which is better: Old or New regime?
The old regime is better if you claim many deductions, while the new regime is better for simplicity and if you don’t have major deductions.
4. Do senior citizens get more tax-free income?
Yes, under the old regime: ₹3 lakh (senior citizens) and ₹5 lakh (super senior citizens).
5. Can I pay zero tax with ₹10 lakh income?
Yes, under the old regime, if you use deductions like 80C, 80D, HRA, and home loan interest, your taxable income can reduce below ₹5 lakh, making you eligible for rebate under 87A.