Income Tax Slabs FY 2026–27: New vs Old Regime, Rebate & Examples

Updated: 19 October 2026 | Tax Year 2026–27 (1 April 2026 to 31 March 2027) | TaxQue Income Tax & ITR Guide

If your employer asks you to choose the old or new tax regime, don't decide only by looking at the highest tax rate. The slab rates are one part of the calculation. Your standard deduction, HRA, eligible investments, home-loan interest and the way your other income is taxed can change the result.

Here's the quick answer: the new regime for FY 2026–27 starts with zero tax up to ₹4 lakh and a rebate can remove normal slab-rate tax for eligible resident individuals with total taxable income up to ₹12 lakh. For someone receiving only qualifying salary income, the ₹75,000 standard deduction can increase that effective salary threshold to ₹12.75 lakh. It is not a universal exemption for all taxpayers or for special-rate income such as certain capital gains.

The new regime is the default. The old regime remains available subject to the applicable option rules. This guide compares both, checks the calculations with realistic examples, and explains when deductions may make the old regime worth considering.

Income tax slabs for FY 2026–27 under the new regime

The following marginal slab rates apply to normal slab-rate income of eligible individuals under Section 202 of the Income-tax Act, 2025. These slabs were carried forward without changes for Tax Year 2026–27.

These rates work progressively, not as a single rate on your entire income. If your taxable income is ₹14 lakh, only the portion above ₹12 lakh is taxed at 15%; the earlier bands keep their own rates.

Source: Income Tax Department – Tax Rates and Computation Official ↗.

Is income up to ₹12 lakh really tax-free?

For an eligible resident individual in the new regime, normal slab-rate tax can become zero when total taxable income is up to ₹12 lakh, because of a rebate of up to ₹60,000 under Section 156. This is different from saying the first ₹12 lakh is exempt from tax for everybody.

Consider a resident individual with ₹12 lakh of taxable salary income after the standard deduction and no special-rate income:

The rebate is available only to resident individuals who meet the statutory conditions. An HUF, a non-resident individual or a company must not assume the same rebate merely because its taxable income is below ₹12 lakh. Further, the rebate does not wipe out tax charged at special rates. Income Tax Department – rebates Official ↗.

How can ₹12.75 lakh of salary result in zero tax?

An eligible salaried resident individual receiving gross taxable salary of ₹12,75,000, with no other income, may deduct ₹75,000 as the new-regime salary standard deduction. Taxable income becomes ₹12,00,000 and the available rebate can reduce normal slab-rate tax to zero.

This is about salary income, not necessarily CTC. Employer provident-fund contributions, exempt reimbursements, perquisites, other income and deductions can alter the computation. Family pension taxed as income from other sources is not the same as a pension taxed under the salary head.

Source: Income Tax Department – salary deductions Official ↗.

What happens if taxable income is just above ₹12 lakh?

A business owner with ₹12.10 lakh of normal taxable income might fear that crossing ₹12 lakh by ₹10,000 makes the entire ₹60,000 rebate disappear. Marginal relief prevents that sharp jump for qualifying resident individuals with eligible income near the threshold.

Take taxable income of ₹12,10,000 under the new regime:

This illustration assumes only normal slab-rate income, no surcharge and no other adjustments. The department's Budget 2026 FAQ similarly illustrates marginal relief near ₹12 lakh, and indicates that the relief phases out at about ₹12,70,588 of total income. Official Budget 2026 rate and rebate FAQ Official ↗.

Old tax regime slabs for FY 2026–27

The old regime allows many familiar deductions and exemptions, but generally has higher slab rates. Resident senior and super-senior citizens enjoy higher basic exemption limits under this regime.

For eligible resident individuals using the old regime, the lower rebate is limited to ₹12,500 where taxable income is up to ₹5 lakh. The old-regime standard deduction against salary is ₹50,000, not ₹75,000.

A non-resident aged 65, for example, must not assume the higher basic exemption for resident senior citizens. Official tax-rate tables Official ↗ and salary deduction guide Official ↗.

New vs old regime: what deductions can you claim?

References such as 80C, 80D and 115BAC are widely recognised 1961 Act labels. The 2025 Act rearranges and renumbers many provisions. Verify the corresponding 2025 Act provision when preparing a Tax Year 2026–27 return, rather than copying older section numbers into a new-law filing. Income Tax Department – deductions Official ↗.

Five worked income tax examples for FY 2026–27

For comparability, the next calculations assume a resident salaried individual below 60, only normally taxed salary, no surcharge, standard deduction as specified, and no special-rate income. Amounts include 4% Health and Education Cess, except where rebate removes the full tax.

Example 1: Gross salary ₹10 lakh, new regime

Gross salary ₹10,00,000 minus standard deduction ₹75,000 equals taxable income ₹9,25,000. Slab tax is ₹20,000 on ₹4–8 lakh plus ₹12,500 on the next ₹1.25 lakh, or ₹32,500. The eligible resident-individual rebate removes that tax. Final tax: ₹0.

Example 2: Gross salary ₹12.75 lakh, new regime

Gross salary ₹12,75,000 less ₹75,000 standard deduction equals ₹12,00,000 taxable. Slab tax ₹60,000 less ₹60,000 rebate gives ₹0.

Example 3: Gross salary ₹15 lakh, new regime

Gross salary ₹15,00,000 less ₹75,000 leaves ₹14,25,000 taxable income.

Example 4: Gross salary ₹25 lakh, new regime

After the ₹75,000 standard deduction, taxable income is ₹24,25,000.

The slab-wise tax is ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000 + ₹7,500 = ₹3,07,500. Cess is ₹12,300, giving ₹3,19,800. No ₹12 lakh rebate applies.

Example 5: ₹15 lakh salary with substantial old-regime deductions

Assume the same ₹15 lakh salary, but this taxpayer can genuinely substantiate qualifying old-regime relief: ₹50,000 salary standard deduction, ₹2 lakh HRA exemption, ₹1.5 lakh eligible investments, ₹25,000 health insurance and ₹2 lakh eligible self-occupied housing interest. These items are hypothetical; not everybody qualifies for them, and the housing/HRA facts must support both.

In this specific scenario, the old regime is ₹6,500 lower than the ₹97,500 new-regime tax for the same gross salary. Without enough valid old-regime deductions, the result could reverse. Income Tax Department – rate and computation guidance Official ↗.

Quick salary comparison: new regime at common income levels

Illustrative resident salary-only cases, without additional income, exemptions, surcharge or adjustments. Values before statutory rounding where applicable.

Capital gains, lottery winnings and crypto: don't apply salary slabs to everything

Not every receipt is taxed through the ordinary income slabs. Certain listed-equity gains, specified long-term gains, lottery winnings and virtual digital asset transfers have separate charging rules. Rates, exemptions and holding-period tests depend on the transaction and the applicable law.

The ₹12 lakh rebate is not a blanket waiver of these special-rate taxes. Likewise, the special income can affect total income for rebate eligibility, while the rebate cannot be applied against the specially rated component. Check the return computation rather than assuming a salary-only result. Income Tax Department – tax rates Official ↗.

Surcharge, cess and the real effective rate

For individuals with very high income, surcharge can apply to the income-tax amount; it is not a flat percentage of salary. The ordinary surcharge bands are broadly 10% above ₹50 lakh to ₹1 crore, 15% above ₹1 crore to ₹2 crore and 25% above ₹2 crore to ₹5 crore. Above ₹5 crore, the old regime's general surcharge can reach 37%, while the new regime generally caps it at 25%, subject to income-specific caps and relief rules.

Health and Education Cess is 4% of income-tax plus applicable surcharge. Marginal relief can also apply around surcharge cutoffs. Because dividend and specified capital gains can attract a different surcharge cap, high-income examples need a personalised calculation. Income Tax Department – computation Official ↗.

Which tax regime should you choose? A practical decision process

For a salary-only taxpayer with no substantial deductions, the new regime is often attractive. For someone paying significant eligible rent, housing interest or other tax-advantaged expenses, the old regime deserves a complete calculation.

If you have business or professional income, do not assume you can switch back and forth without restrictions. Under the 2025 Act's default-new-regime framework, the option has specific timing and continuity rules. Check the prescribed electronic option and filing instructions for Tax Year 2026–27 when filing. The 1961 Act's Form 10-IEA is a useful historical reference, not proof of the correct form under the new Act. Official tax regime guidance Official ↗.

For a further comparison, read old vs new tax regime. You can also estimate the result with TaxQue's income tax calculator and salary calculator. Check tools have been updated for the Income-tax Act, 2025 before relying on their 2026–27 output.

Common mistakes that create a wrong tax estimate

1. Confusing FY 2026–27 with AY 2026–27. These are different periods governed by different legislation.
2. Applying 30% to the entire salary. Income-tax slabs are progressive.
3. Treating ₹12 lakh as a universal tax-free allowance. The benefit depends on resident-individual rebate eligibility and income composition.
4. Using ₹75,000 as a deduction against business income. Salary standard deduction is tied to qualifying salary/pension, not every source of income.
5. Assuming the old regime is better simply because you invest in mutual funds. Not every investment qualifies for deduction.
6. Ignoring special-rate gains or surcharge. A simple salary calculator may understate liability.
7. Choosing the regime without checking filing-option rules. Especially important when declaring business income.
8. Using past-year section numbers or unverified calculators. Tax Year 2026–27 falls under the 2025 Act.

Documents to keep before choosing your regime

• Salary statements, Form 16 or the tax-year-equivalent salary/TDS records available at filing time.
• Form 26AS and the applicable annual information statement or successor information records.
• Bank interest, rental income and capital-gains statements.
• Proof of eligible rent, insurance, investments, housing interest and employer NPS contributions, where relevant.
• Details of tax already paid through TDS, TCS or advance tax.
• Prior returns and business-income regime elections, if applicable.

Need help comparing both? TaxQue income tax return filing services can help with income classification, eligible deductions and a documented regime comparison rather than relying on a generic take-home-salary estimate.

Final takeaway

The 2026–27 new tax regime offers a much wider nil-rate band and a meaningful rebate for qualifying resident individuals. But the best regime is the one that produces the lowest lawful tax on your actual income, not the one with the most appealing headline. Calculate both regimes, verify your deductions, and keep special-rate income separate.

This article provides general education as of 19 October 2026. Rates and eligibility should be checked again when preparing the final return; examples exclude circumstances not expressly described.

Official sources and further reading

1. Income Tax Department — Tax Rates and Computation Official ↗
2. Income Tax Department — Budget 2026 Rates and Rebate FAQs Official ↗
3. Income Tax Department — Deductions Allowable Official ↗
4. Income Tax Department — Salary Standard Deduction Official ↗
5. Income Tax Department — Resident Rebate Guidance Official ↗
6. Income Tax Department — Transition FAQs for the 2025 Act Official ↗
7. Income Tax Department — ITR-2 FAQs and Slabs (AY 2026–27 for comparison) Official ↗