FY 2026-27 is the first full year under the Income Tax Act 2025, which replaced the 1961 Act on April 1, 2026. While the new Act restructured section numbers and filing procedures, the actual slab rates remain unchanged from FY 2025-26. This guide covers the exact rates under both regimes, the rebate and deduction rules, and a worked example comparing the two.
New Tax Regime: Slab Rates for FY 2026-27
Tax Rate Chart
New Tax Regime Slab Rates : FY 2026-27 (Default Regime)
Effective from FY 2025-26 under Finance Act 2025 · Section 115BAC
Up to Rs. 4,00,000
Nil tax. Also applies to HUFs and AOPs.
Rs. 4,00,001 : Rs. 8,00,000
Rs. 20,000 max tax on this slab alone.
Rs. 8,00,001 : Rs. 12,00,000
Section 87A rebate makes tax nil up to Rs. 12L total income.
Rs. 12,00,001 : Rs. 16,00,000
Rs. 60,000 max on this slab.
Rs. 16,00,001 : Rs. 20,00,000
Rs. 80,000 max on this slab.
Rs. 20,00,001 : Rs. 24,00,000
Rs. 1,00,000 max on this slab.
Above Rs. 24,00,000
Plus 4% health & education cess on total tax. Surcharge applies above Rs. 50L.
Source: Finance Act 2025; PIB Press Release Feb 1, 2025; incometaxindia.gov.in
The new regime (Section 115BAC of the 1961 Act, now Section 202 of the Income-tax Act 2025 for FY 2026-27) is the default for all individual taxpayers, Hindu Undivided Families (HUFs), and Associations of Persons (AOPs). You do not need to opt in; it applies automatically unless you choose the old regime.
These rates were introduced by the Finance Act 2025 and apply to both FY 2025-26 and FY 2026-27 (PIB Press Release, February 1, 2025).
Standard deduction for salaried individuals and pensioners: Rs 75,000. See how it works with the rebate in the standard deduction under the new tax regime guide.
Section 87A rebate: A resident individual with taxable income up to Rs 12,00,000 gets a rebate of up to Rs 60,000, making the entire tax liability nil. For salaried employees, after deducting the Rs 75,000 standard deduction, gross salary up to Rs 12,75,000 is effectively tax-free (incometaxindia.gov.in, Tax Rates as amended by Finance Act 2025). Read the dedicated Section 87A rebate eligibility and limit guide for who qualifies and how the Rs 12 lakh threshold works.
Marginal relief: If your income is slightly above Rs 12 lakh, the tax payable will not exceed the amount by which your income exceeds Rs 12,00,000. This prevents a sharp jump in liability.
Special-rate income: The rebate is not available against tax on income taxed at special rates, such as STCG under Section 111A and LTCG under Sections 112 and 112A (Finance Act 2025 memorandum). Such gains still form part of your total income, so they count toward the Rs 12 lakh limit.
Old Tax Regime: Slab Rates for FY 2026-27
The old regime is available only if you explicitly opt in. Salaried individuals can choose each year during ITR filing. Business owners must exercise the option by the return due date; it then continues for later years and can be withdrawn only once.
Individual Below 60 Years
- Up to Rs 2,50,000: Nil
- Rs 2,50,001 to Rs 5,00,000: 5%
- Rs 5,00,001 to Rs 10,00,000: 20%
- Above Rs 10,00,000: 30%
Senior Citizen (60 to 79 Years)
- Up to Rs 3,00,000: Nil
- Rs 3,00,001 to Rs 5,00,000: 5%
- Rs 5,00,001 to Rs 10,00,000: 20%
- Above Rs 10,00,000: 30%
Super Senior Citizen (80 Years and Above)
- Up to Rs 5,00,000: Nil
- Rs 5,00,001 to Rs 10,00,000: 20%
- Above Rs 10,00,000: 30%
Standard deduction: Rs 50,000 for salaried individuals and pensioners.
Section 87A rebate: Rs 12,500 for resident individuals with taxable income up to Rs 5,00,000.
The old regime allows deductions under Section 80C (up to Rs 1.5 lakh), Section 80D (medical insurance), HRA exemption, home loan interest under Section 24, and other provisions not available in the new regime (incometax.gov.in/iec/foportal/, AY 2026-27 guide for salaried individuals).
Surcharge and Health & Education Cess
Both regimes charge a 4% Health and Education Cess on total tax (including surcharge, if any).
Surcharge Rates
| Total income | New regime | Old regime |
|---|---|---|
| Above Rs 50 lakh to Rs 1 crore | 10% | 10% |
| Above Rs 1 crore to Rs 2 crore | 15% | 15% |
| Above Rs 2 crore to Rs 5 crore | 25% | 25% |
| Above Rs 5 crore | 25% | 37% |
Surcharge on tax on capital gains under Sections 111A, 112 and 112A and on dividends is capped at 15%.
The new regime caps the maximum surcharge at 25%, regardless of income level. Under the old regime, income above Rs 5 crore attracts a 37% surcharge (incometaxindia.gov.in, Tax Rates PDF).
Worked Example: Rs 15 Lakh Salaried Income
To illustrate the difference between regimes, consider a salaried individual earning Rs 15,00,000 gross salary with no other income.
New Regime Calculation
- Gross salary: Rs 15,00,000
- Standard deduction: Rs 75,000
- Taxable income: Rs 14,25,000
- Tax: Nil (first 4L) + Rs 20,000 (4L to 8L at 5%) + Rs 40,000 (8L to 12L at 10%) + Rs 33,750 (12L to 14.25L at 15%) = Rs 93,750
- Cess at 4%: Rs 3,750
- Total tax: Rs 97,500
Old Regime Calculation (with typical deductions)
Assume: Rs 1,50,000 under Section 80C, Rs 25,000 under Section 80D.
- Gross salary: Rs 15,00,000
- Standard deduction: Rs 50,000
- Deductions: Rs 1,75,000
- Taxable income: Rs 12,75,000
- Tax: Nil (first 2.5L) + Rs 12,500 (2.5L to 5L at 5%) + Rs 1,00,000 (5L to 10L at 20%) + Rs 82,500 (10L to 12.75L at 30%) = Rs 1,95,000
- Cess at 4%: Rs 7,800
- Total tax: Rs 2,02,800
Difference: The new regime saves Rs 1,05,300 in this scenario. At Rs 15 lakh, the old regime becomes cheaper only when total deductions and exemptions (80C, 80D, HRA, home loan interest, NPS) exceed about Rs 5.44 lakh, or Rs 5.94 lakh including the Rs 50,000 standard deduction.
Common Mistakes to Avoid
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Assuming the old regime applies by default. The new regime is the default from FY 2023-24 onwards. If you want the old regime, you must explicitly select it when filing your return.
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Assuming the rebate covers capital gains. If your taxable salary is Rs 9 lakh and you also have Rs 2 lakh of STCG under Section 111A, total income is Rs 11 lakh, so the rebate wipes out the Rs 30,000 slab tax on salary. The Rs 40,000 tax on STCG (20%) is still payable, plus cess. If salary plus gains crosses Rs 12 lakh, the full rebate is lost.
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Comparing regimes without calculating actual deductions. Many taxpayers assume the old regime is better without adding up their actual eligible deductions. Run the numbers for both before choosing.
Tax Garden Can Help
Choosing the right regime and filing accurately under the new Income Tax Act 2025 requires attention to detail. Tax Garden's income tax filing service includes regime comparison for your specific situation, accurate computation, and timely filing. Explore our income tax compliance plans or read more about what changed under the new Act.
Frequently Asked Questions
Did Budget 2026 change the income tax slabs for FY 2026-27?
No. The new regime slabs introduced by Finance Act 2025 continue for FY 2026-27: nil up to Rs 4 lakh, then 5%, 10%, 15%, 20% and 25% in Rs 4 lakh steps, and 30% above Rs 24 lakh. The old regime slabs and the 4% health and education cess are also unchanged.
Is salary of Rs 12.75 lakh really tax-free in FY 2026-27?
Yes, under the new regime for a resident individual with only salary income. The Rs 75,000 standard deduction brings taxable income to Rs 12 lakh, and the Section 87A rebate of up to Rs 60,000 wipes out the tax. The rebate does not cover tax on special-rate income such as STCG under Section 111A or LTCG under Section 112A.
How much tax is payable if income is just above Rs 12 lakh under the new regime?
Marginal relief applies. Your tax cannot exceed the amount by which taxable income exceeds Rs 12 lakh. For example, at a taxable income of Rs 12,10,000, normal slab tax would be about Rs 61,500, but with marginal relief you pay only Rs 10,000 plus 4% cess.
Can a salaried person switch between old and new regime every year?
Yes. A salaried individual without business income can choose the regime afresh each year while filing the return by the due date. A person with business or professional income who opts out of the new regime must exercise the option by the due date (Form 10-IEA under the 1961 Act); the option continues for later years and can be withdrawn only once, after which the old regime is not available again while they have business income.
What is the maximum surcharge under the new tax regime?
Surcharge under the new regime is capped at 25%, which applies to income above Rs 2 crore. Under the old regime, the top surcharge rate is 37% on income above Rs 5 crore. Cess of 4% is charged on income tax plus surcharge under both regimes.
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