New Tax Regime Slabs for FY 2026-27 (AY 2027-28)
The new tax regime, governed by Section 202 of the Income Tax Act 2025 (previously Section 115BAC), offers lower slab rates but restricts most deductions. The slabs below apply to all resident individuals regardless of age.
Zero-tax limit: A salaried person with gross salary up to ₹12,75,000 pays zero tax under the new regime for FY 2026-27. After the standard deduction of ₹75,000, taxable income is ₹12 lakh. The slab tax of ₹60,000 is fully offset by the Section 87A rebate.
Old Tax Regime Slabs for FY 2026-27
The old tax regime has stricter slab rates but allows a comprehensive set of deductions. Tax slabs differ by age group.
Under the old regime, the standard deduction is ₹50,000 (vs ₹75,000 under new regime). Individuals with income up to ₹5 lakh (after all deductions) pay zero tax due to the Section 87A rebate of ₹12,500.
New Regime vs Old Regime: Income-wise Tax Comparison
The table below shows your actual tax liability at different income levels under both regimes. "Old (no deductions)" assumes only the standard deduction. "Old (max deductions)" assumes 80C ₹1.5L + 80D ₹25K + NPS 80CCD(1B) ₹50K + home loan interest ₹2L.
* At ₹25L and above, the old regime with maximum deductions (80C + NPS + home loan interest) can save more, but only if you actually have and claim those investments.
Deductions: Old Regime vs New Regime
The old tax regime allows a wide array of deductions. The new regime restricts most of them to encourage simplicity.
How to Calculate Income Tax on Salary
Here is an example for a salaried individual earning ₹20 lakh gross salary under the new regime for FY 2026-27:
Key Income Tax Changes from Budget 2025
The Union Budget presented on 1 February 2025 introduced the following changes to income tax, effective from FY 2025-26 onwards:
Section 87A rebate raised to ₹60,000 (new regime)
Previously ₹25,000, the rebate is now ₹60,000 under the new tax regime. This ensures that taxable income up to ₹12 lakh, effectively gross salary up to ₹12.75 lakh for salaried persons, is completely tax-free.
New regime slab rates revised
Slabs were revised with a zero-tax bracket up to ₹4 lakh and a new 25% slab for ₹20L to ₹24L, making the regime more competitive across income levels.
Standard deduction raised to ₹75,000 (new regime)
The standard deduction for salaried individuals under the new regime was increased from ₹50,000 to ₹75,000.
TDS threshold on rent raised to ₹50,000 per month
TDS under Section 194-IB for individuals paying rent is now triggered at ₹50,000 per month instead of ₹50,000 per year.
Higher interest deduction for senior citizens
Section 80TTB deduction on interest income for senior citizens was raised from ₹50,000 to ₹1,00,000.
Income Tax Act 2025
The new Income Tax Act 2025 recodifies the Income Tax Act, 1961. The new regime provisions move from Section 115BAC to Section 202 of the new Act, with tax rates unchanged.
Surcharge and Education Cess
Surcharge is an additional levy on income tax for high earners. It is calculated on the income tax (after rebate), not on income. A 4% Health and Education Cess applies on the combined total of tax + surcharge.
From ₹50 lakh to ₹5 crore the surcharge rates are identical across both regimes. The only difference is above ₹5 crore: old regime applies 37%, while the new regime is capped at 25%, making the new regime meaningfully more efficient at the very highest incomes.