Income Tax Slabs FY 2026-27: New vs Old Regime Rates

India income tax slabs for 2026 follow a 7-tier structure under the new tax regime and a 4-tier structure under the old regime. Whether you are calculating your take-home salary, deciding between regimes, or figuring out how much TDS your employer should deduct, the slab rates are where every tax planning decision starts. For a complete overview of India’s income tax system, refer to my Complete Income Tax Guide for India.

In my seven years of working with salaried professionals, the most common mistake I see is people assuming the new regime is always better at higher incomes. That is not accurate. At Rs. 15 lakh and above with full deductions, the old regime can still save meaningful tax. This guide covers the complete slab structure for FY 2025-26 and FY 2026-27 with verified calculations at four salary levels.

Budget 2026 Update: Finance Minister Nirmala Sitharaman made no changes to income tax slabs in Budget 2026. The slab rates for FY 2026-27 are identical to FY 2025-26. The new Income Tax Act 2025 came into effect from April 1, 2026, replacing the Income Tax Act 1961, but with no change in slab rates or deduction limits.

New Tax Regime Slabs: FY 2025-26 and FY 2026-27

The new tax regime is the default regime from FY 2023-24 onwards. If you do not actively choose a regime, this applies automatically.

Key benefit: Under the new regime, income up to Rs. 12,00,000 is effectively tax-free due to the Section 87A rebate of Rs. 60,000. For salaried professionals, this extends to Rs. 12,75,000 after the Rs. 75,000 standard deduction.

Old Tax Regime Slabs: FY 2025-26 and FY 2026-27

The old tax regime has a simpler slab structure. Its advantage comes from the large number of deductions available under Section 80C, 80D, HRA, home loan interest, and others.

For individuals below 60 years:

For Senior Citizens (60 to 79 years):

For Super Senior Citizens (80 years and above):

Under the old regime, individuals with income up to Rs. 5,00,000 pay zero tax due to the Section 87A rebate of Rs. 12,500. For a detailed comparison of which regime works better at your income level, refer to my guide on the old vs new tax regime.

Standard Deduction: Both Regimes

Standard deduction is available to all salaried employees and pensioners automatically. No proof or investment is required. For a detailed breakdown of what standard deduction covers, refer to my guide on standard deduction FY 2026-27.

Section 87A Rebate: Zero Tax Limit Explained

Many professionals confuse the basic exemption limit with the zero tax limit. They are different.

For salaried professionals in the new regime, the effective zero tax salary is Rs. 12,75,000 (Rs. 12,00,000 plus Rs. 75,000 standard deduction).

Important: The Section 87A rebate does not apply to special rate incomes such as Long Term Capital Gains under Section 112A and Short Term Capital Gains under Section 111A from equity mutual funds and shares.

Actual Tax Calculation: Real Salary Examples

Here is exactly how much tax you pay at four salary levels under both regimes. All calculations include Health and Education Cess at 4%. Old regime calculations assume realistic deductions.

Salary: Rs. 8,00,000 per year

At Rs. 8 lakh salary, new regime saves Rs. 16,120.

Salary: Rs. 12,00,000 per year

At Rs. 12 lakh salary, new regime saves Rs. 85,800. This is the most powerful example of the new regime’s advantage for salaried professionals.

Salary: Rs. 15,00,000 per year

At Rs. 15 lakh with full deductions, new regime still saves Rs. 10,140 over old regime. However, this gap narrows significantly when deductions are maximised. If your deductions exceed Rs. 5.5 lakh, old regime may become better.

Salary: Rs. 20,00,000 per year

At Rs. 20 lakh with full deductions, new regime saves Rs. 49,400.

Surcharge: Who Pays Extra and How Much

Surcharge is an additional tax on top of calculated income tax. It applies only to high income earners.

Under the new tax regime, the highest surcharge rate is capped at 25%. Under the old regime, it goes up to 37% for income above Rs. 5 crore. This makes the new regime significantly more attractive for very high earners.

Health and Education Cess

Cess is charged at 4% on total income tax plus surcharge under both regimes. There is no exemption from cess and it applies to all taxpayers regardless of income level.

Example: If your income tax is Rs. 1,00,000 and surcharge is nil, your cess is Rs. 4,000. Total tax payable is Rs. 1,04,000.

Income Tax Slabs for Special Categories

NRIs (Non-Resident Indians): NRIs follow the same new regime slab rates as resident individuals for India-sourced income. However, NRIs are not eligible for the Section 87A rebate. This means NRIs pay tax from the first rupee of taxable income above the basic exemption limit.

Partnership firms and LLPs: Taxed at a flat 30% plus applicable surcharge and cess. Slab rates do not apply to firms.

Domestic companies: Flat 22% under the concessional regime (Section 115BAA) or 25-30% under the regular regime. Slab rates do not apply.

For the official tax slab notification, refer to the Income Tax Department’s official portal.

Key Changes Under the New Income Tax Act 2025

The New Income Tax Act 2025 came into effect from April 1, 2026. Key points for salaried taxpayers:

• For FY 2025-26 ITR (filed July 2026): Use Tab 1 on the income tax portal. Old Act 1961 provisions apply.
• For Tax Year 2026-27 ITR (filed July 2027): Use Tab 2. New Act 2025 provisions apply.
• Section 80C is now Section 123 under the new Act. The deduction limit remains unchanged at Rs. 1.5 lakh.
• Section 80D is now Section 124. Health insurance deduction limits unchanged.
• Form 16 has been replaced by Form 130 for TDS certificates. For a detailed guide, refer to my article on Form 16 replaced by Form 130.

Which Tax Regime Should You Choose Based on Slabs Alone?

For most salaried professionals in FY 2025-26, the new regime is better unless deductions are very high. A simple way to think about it:

New regime is better if: Your total deductions (excluding standard deduction) are below Rs. 4.5 lakh at Rs. 15 lakh salary, or below Rs. 5.5 lakh at Rs. 20 lakh salary.

Old regime is better if: You have significant deductions from home loan interest, HRA in a metro, NPS contribution, and maximum 80C investments that collectively exceed the breakeven threshold.

For a detailed breakeven analysis at your specific income and deduction level, refer to my guide on the old vs new tax regime. For TDS implications on your salary, refer to my guide on TDS on salary Section 192.

How to File ITR with Correct Slab Computation

Your tax liability as per slabs is auto-computed on the income tax portal when you file your ITR. However, verifying the computation yourself before filing prevents errors.

The ITR deadline for salaried professionals for FY 2025-26 is July 31, 2026. For the complete filing process, refer to my guide on how to file ITR online. For the applicable ITR form based on your income sources, refer to my guide on which ITR form to file FY 2025-26.

Summary: Key Numbers to Remember

Conclusion

India income tax slabs for FY 2025-26 and FY 2026-27 are identical – Budget 2026 brought no changes to rates or deduction limits. The new tax regime remains the default, and for most salaried professionals earning up to Rs. 12,75,000, the answer is straightforward: zero tax.

Beyond that threshold, the choice between regimes depends entirely on your deduction profile. At Rs. 15 lakh, even with maximum deductions of Rs. 4,95,000, the new regime saves Rs. 10,140. At Rs. 20 lakh with Rs. 5,50,000 in deductions, the new regime still saves Rs. 49,400. The breakeven point shifts only when deductions are very high – typically above Rs. 5.5 lakh at Rs. 15 lakh salary or above Rs. 6.5 lakh at Rs. 20 lakh salary.

For FY 2025-26 ITR filing due July 31, 2026, use Tab 1 on the income tax portal. The New Income Tax Act 2025 applies from Tax Year 2026-27 onwards, but slab rates remain unchanged under both Acts.

Frequently Asked Questions

Is the new tax regime compulsory from FY 2025-26? The new regime is the default, not compulsory. Salaried professionals can opt for the old regime every year at the time of filing ITR or by submitting a declaration to their employer at the start of the financial year.

What is the income tax slab for Rs. 10 lakh salary in 2026? Under the new regime: Taxable income after standard deduction = Rs. 9,25,000. Tax = Rs. 20,000 (4-8L at 5%) + Rs. 12,500 (8-9.25L at 10%) = Rs. 32,500. Since taxable income is below Rs. 12L, Section 87A rebate applies fully. Total tax = Rs. 0.

Can I switch between old and new regime every year? Salaried employees can switch regimes every financial year. However, individuals with business income can switch only once from new to old regime. After that switch, they cannot return to the new regime.

Does the new regime apply to FY 2025-26 automatically? Yes. If you did not actively opt for the old regime, the new regime applies to your FY 2025-26 income. Your employer would have deducted TDS under the new regime unless you submitted a declaration for old regime.

What is the tax on Rs. 12,75,000 salary under the new regime? Rs. 12,75,000 gross minus Rs. 75,000 standard deduction = Rs. 12,00,000 taxable. Tax on Rs. 12,00,000 = Rs. 60,000 before rebate. Section 87A rebate = Rs. 60,000. Tax payable = Rs. 0. This is the maximum salary at which a salaried professional pays zero tax under the new regime.

Written & Reviewed by

Diksha Chawla

Financial Educator & Content Creator | FinLecture.in

Diksha covers Indian income tax, mutual funds, ITR filing, and personal finance. FinLecture content is cross-checked against official government portals and SEBI/AMFI guidelines.

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