Income Tax Slabs for AY 2026-27 apply to income earned during FY 2025-26. For most individual taxpayers, the new tax regime under Section 115BAC remains the default option, with slab rates starting after ₹4 lakh and a Section 87A rebate that can make taxable income up to ₹12 lakh tax-free, subject to conditions. But the old tax regime has not disappeared. It can still be better when deductions such as Section 80C, HRA, home loan interest, Section 80D, NPS and other eligible claims are substantial.
This guide explains the latest new tax regime slabs for AY 2026-27, the old tax regime slabs, standard deduction, Section 87A rebate, surcharge, cess, marginal relief and practical tax examples. The aim is simple: before filing your return, compare both regimes with your actual income and deductions instead of choosing one blindly.
- Quick summary for AY 2026-27
- What are income tax slabs?
- New tax regime slabs for AY 2026-27
- Old tax regime slabs for AY 2026-27
- Standard deduction in new and old regime
- Section 87A rebate for AY 2026-27
- Tax calculation examples
- New vs old tax regime comparison
- Which tax regime should you choose?
- Surcharge, cess and marginal relief
- Can you switch between tax regimes?
- Related DN & CO. reads
- Frequently asked questions
- Official references
- Disclaimer
Quick Summary for AY 2026-27
| Point | AY 2026-27 Position |
|---|---|
| Relevant financial year | FY 2025-26, income earned from 1 April 2025 to 31 March 2026 |
| Default regime | New tax regime under Section 115BAC |
| New regime basic exemption | Up to ₹4,00,000 |
| Old regime basic exemption | ₹2,50,000 for individuals below 60, ₹3,00,000 for senior citizens, ₹5,00,000 for super senior citizens |
| Standard deduction for salary or pension | ₹75,000 in new regime and ₹50,000 in old regime, subject to salary/pension income |
| Section 87A rebate | Up to ₹60,000 in new regime if taxable income does not exceed ₹12 lakh; up to ₹12,500 in old regime if taxable income does not exceed ₹5 lakh |
| Health and education cess | 4% on income tax plus surcharge, if any |
What Are Income Tax Slabs?
Income tax slabs are income ranges on which different tax rates apply. India uses a progressive tax system, so the entire income is not taxed at the highest rate. Only the income falling in a particular slab is taxed at that slab's rate.
For example, under the new regime, if taxable income is above ₹8 lakh, it does not mean the whole income is taxed at 10%. Income up to ₹4 lakh is nil, the next portion from ₹4 lakh to ₹8 lakh is taxed at 5%, and only the next portion is taxed at 10%. This slab-wise method is why tax planning should be done with the full computation, not just by looking at the highest slab.
New Tax Regime Slabs for AY 2026-27
The new tax regime is the default regime for eligible individual taxpayers. It offers lower and wider slab rates, but most traditional deductions and exemptions are not available. It is usually attractive for taxpayers who do not claim large deductions.
| Total Income Under New Regime | Income Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Key Advantages of the New Tax Regime
- Higher nil slab up to ₹4 lakh.
- Simple slab structure with rates increasing gradually up to 30%.
- Standard deduction of ₹75,000 for eligible salaried taxpayers and pensioners.
- Section 87A rebate up to ₹60,000 for eligible resident individuals with taxable income not exceeding ₹12 lakh.
- Lower highest surcharge compared with the old regime for very high income cases.
Common Limitation of the New Tax Regime
The trade-off is that many popular deductions and exemptions are either restricted or not available. A taxpayer claiming HRA, home loan interest on self-occupied property, large Section 80C investments, medical insurance under Section 80D, NPS deduction under Section 80CCD(1B), education loan interest or similar benefits should compare the old regime carefully.
Old Tax Regime Slabs for AY 2026-27
The old tax regime continues to matter because it allows a wider set of deductions and exemptions. It may be better for taxpayers with disciplined investments, housing loan benefits, rent-based salary structuring, medical insurance premiums and other eligible deductions.
Old Regime Slabs for Individuals Below 60 Years
| Total Income Under Old Regime | Income Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Old Regime Slabs for Senior and Super Senior Citizens
| Taxpayer Category | Nil Slab Under Old Regime | Important Note |
|---|---|---|
| Resident individual below 60 years | Up to ₹2,50,000 | Regular old regime slab applies |
| Resident senior citizen, 60 years or more but below 80 years | Up to ₹3,00,000 | Higher basic exemption is available only under the old regime |
| Resident super senior citizen, 80 years or more | Up to ₹5,00,000 | Old regime has a separate slab benefit for this category |
Standard Deduction in New and Old Regime
Standard deduction is one of the most important salary-related deductions because it does not require separate investment proof. For AY 2026-27, eligible salaried taxpayers and pensioners should note the difference carefully.
| Regime | Standard Deduction for Salary/Pension |
|---|---|
| New tax regime | ₹75,000 or salary/pension amount, whichever is lower |
| Old tax regime | ₹50,000 or salary/pension amount, whichever is lower |
This difference is a major reason why many salaried taxpayers find the new regime competitive even when they have some deductions. However, if a taxpayer has large old-regime claims, the higher standard deduction alone may not be enough to make the new regime better.
Section 87A Rebate for AY 2026-27
Section 87A rebate reduces the income tax payable by eligible resident individuals. It is not the same as a deduction. A deduction reduces income first; a rebate reduces tax after the slab calculation.
| Tax Regime | Maximum Rebate | Income Condition |
|---|---|---|
| New tax regime | Up to ₹60,000 | Taxable income should not exceed ₹12,00,000 |
| Old tax regime | Up to ₹12,500 | Taxable income should not exceed ₹5,00,000 |
Tax Calculation Examples for AY 2026-27
Example 1: Salaried Taxpayer with Gross Salary of ₹12.75 Lakh
Suppose a resident salaried taxpayer has gross salary of ₹12,75,000 and chooses the new tax regime.
| Particulars | Amount |
|---|---|
| Tax on first ₹4,00,000 | Nil |
| Tax on ₹4,00,001 to ₹8,00,000 at 5% | ₹20,000 |
| Tax on ₹8,00,001 to ₹12,00,000 at 10% | ₹40,000 |
| Total tax before rebate | ₹60,000 |
| Less: Section 87A rebate | ₹60,000 |
| Tax after rebate | Nil |
In this example, the standard deduction brings taxable income to ₹12 lakh, and the Section 87A rebate removes the normal tax payable. This is why the new regime is powerful for salaried taxpayers around this income level.
Example 2: Taxable Income of ₹15 Lakh Under New Regime
Now assume taxable income after eligible deductions is ₹15,00,000 under the new regime.
| Slab Portion | Tax |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 at 5% | ₹20,000 |
| ₹8,00,001 to ₹12,00,000 at 10% | ₹40,000 |
| ₹12,00,001 to ₹15,00,000 at 15% | ₹45,000 |
| Total tax before cess | ₹1,05,000 |
| Add: Health and education cess at 4% | ₹4,200 |
| Total tax payable | ₹1,09,200 |
Section 87A rebate is not available here because taxable income exceeds ₹12 lakh. This is the point where small changes in taxable income can have a visible effect, so salary structuring and eligible deductions should be reviewed carefully.
Example 3: Old Regime May Still Win When Deductions Are High
Suppose a salaried taxpayer has gross income of ₹16 lakh and has genuine old-regime benefits such as Section 80C, HRA, medical insurance, home loan interest and NPS. If these claims are large enough, taxable income under the old regime may fall substantially.
New vs Old Tax Regime Comparison
| Feature | New Tax Regime | Old Tax Regime |
|---|---|---|
| Default option | Yes | No, must be opted where applicable |
| Slab rates | Lower and more gradual | Higher after lower exemption limit |
| Standard deduction for salary/pension | ₹75,000 | ₹50,000 |
| Section 87A rebate threshold | Taxable income up to ₹12 lakh | Taxable income up to ₹5 lakh |
| Section 80C, HRA, many exemptions | Mostly not available | Generally available subject to conditions |
| Best suited for | Taxpayers with fewer deductions and simpler income profile | Taxpayers with substantial eligible deductions and exemptions |
Which Tax Regime Should You Choose?
A practical way to decide is to prepare two working computations. First calculate taxable income and tax under the new regime. Then calculate taxable income and tax under the old regime after considering all genuine deductions and exemptions. The lower final tax after cess should guide the choice.
The New Regime May Be Better If:
- You do not have large deductions apart from standard deduction.
- Your taxable income is near or below ₹12 lakh under the new regime.
- You want a simpler return computation with fewer proofs and exemption calculations.
- Your salary structure does not include significant HRA or other old-regime benefits.
The Old Regime May Be Better If:
- You claim HRA and actually pay eligible rent.
- You have substantial Section 80C investments or payments.
- You pay medical insurance premium eligible under Section 80D.
- You have home loan interest benefit, especially on a self-occupied house property.
- You make NPS contribution eligible for additional deduction under the old regime.
Surcharge, Cess and Marginal Relief
After normal income tax is computed, surcharge may apply to high-income taxpayers. Health and education cess at 4% applies on income tax plus surcharge, if any.
| Total Income | Surcharge in New Regime | Surcharge in Old Regime |
|---|---|---|
| Up to ₹50 lakh | Nil | Nil |
| Above ₹50 lakh up to ₹1 crore | 10% | 10% |
| Above ₹1 crore up to ₹2 crore | 15% | 15% |
| Above ₹2 crore up to ₹5 crore | 25% | 25% |
| Above ₹5 crore | 25% | 37% |
Marginal relief is meant to prevent a taxpayer from paying disproportionately higher tax merely because income crosses a surcharge threshold. In simple words, where eligible, the extra tax and surcharge should not exceed the amount by which income crosses the relevant threshold.
Can You Switch Between Tax Regimes?
For taxpayers without business or professional income, the option to choose the old regime instead of the default new regime can generally be exercised every year while filing the return, subject to timely filing and portal rules.
For taxpayers having income from business or profession, the rules are stricter. Such taxpayers generally need to furnish Form 10-IEA within the prescribed timeline to opt out of the default new regime. Withdrawal and re-entry rules are also more limited, so the decision should not be made casually.
Related DN & CO. Reads
To connect this slab comparison with return filing and compliance planning, these related DN & CO. guides may help:
- For instalment-wise payment planning, read this guide on advance tax for Tax Year 2026-27.
- If you have business or professional income, compare regime choice with this presumptive taxation guide for AY 2026-27.
- For the new-law transition from 1 April 2026, see new income tax forms 2026 explained.
- For businesses updating payroll, TDS and GST controls, refer to GST and income tax compliance changes for FY 2026-27.
Frequently Asked Questions
1. What are the income tax slabs for AY 2026-27 under the new tax regime?
Under the new tax regime, income up to ₹4 lakh is nil, ₹4 lakh to ₹8 lakh is taxed at 5%, ₹8 lakh to ₹12 lakh at 10%, ₹12 lakh to ₹16 lakh at 15%, ₹16 lakh to ₹20 lakh at 20%, ₹20 lakh to ₹24 lakh at 25%, and income above ₹24 lakh at 30%.
2. Is the new tax regime compulsory for AY 2026-27?
The new tax regime is the default regime, but eligible taxpayers can opt for the old regime. Taxpayers with business or professional income should check Form 10-IEA and due-date requirements before choosing the old regime.
3. Is income up to ₹12 lakh completely tax-free?
For eligible resident individuals under the new regime, taxable income up to ₹12 lakh can become tax-free because of Section 87A rebate. For salaried taxpayers, gross salary up to ₹12.75 lakh may also become tax-free if the ₹75,000 standard deduction brings taxable income to ₹12 lakh. Eligibility and income type must be checked.
4. What is the standard deduction for AY 2026-27?
Eligible salaried taxpayers and pensioners can claim standard deduction of ₹75,000 under the new regime and ₹50,000 under the old regime, subject to salary or pension income.
5. Which regime is better for salaried employees?
The new regime is often better where deductions are limited. The old regime can be better where HRA, home loan interest, Section 80C, Section 80D, NPS and other eligible claims are significant. The final answer depends on the actual computation.
6. Does the old tax regime still allow Section 80C deduction?
Yes, the old regime generally allows eligible deductions such as Section 80C, Section 80D and certain other claims, subject to conditions and limits. These are among the main reasons taxpayers still compare the old regime.
7. Is cess applicable after rebate?
Cess is calculated on income tax plus surcharge, if any. If eligible rebate reduces tax to nil, cess on such nil tax also becomes nil. Where tax remains payable, health and education cess applies at 4%.
8. Should senior citizens choose the old regime?
Not always. Senior and super senior citizens get higher basic exemption under the old regime, but the new regime has lower slabs and a higher rebate threshold. The better regime depends on income level, deductions, interest income and other facts.
Official References
- Income Tax Department - Salaried Individuals for AY 2026-27
- Income Tax Department - Income from Salary and Standard Deduction
- Income Tax Act, 2025 - Section 156 Rebate of Income-tax
- PIB - Standard Deduction Increased Under New Tax Regime
Conclusion
For AY 2026-27, the new tax regime is clearly designed to be simple and attractive, especially for taxpayers with moderate income and limited deductions. The ₹4 lakh nil slab, ₹75,000 standard deduction for salary and pension, and Section 87A rebate up to ₹60,000 make it strong for many individuals.
Still, the old regime remains relevant. If you have genuine deductions, rent exemption, home loan interest, insurance premiums or retirement contributions, do not ignore the old regime without calculation. The best approach is to compare both regimes using actual figures, verify AIS/Form 16 data, and then file the return under the regime that gives the correct and lower tax liability.