Income Tax Slabs FY 2026-27 (AY 2027-28): New Rates

If you've filed returns for a few years running, you already know the drill: check the slabs, pick a regime, calculate the tax. FY 2026-27 changes that routine in one important way — this is the first tax year governed by the Income-tax Act, 2025, which replaces the Income-tax Act, 1961, and officially retires the "previous year/assessment year" terminology in favor of a single, simpler "Tax Year."

That said, most people will still search using the old language — "FY 2026-27" and "AY 2027-28" — so this guide uses both, explains the terminology shift upfront, and then gets straight to what actually matters: the slabs, the rebate, the deductions, and real worked examples so you know exactly what you'll owe. If you want a plain-English refresher on terms like "taxable income," "rebate," or "cess" before diving in, our beginner's tax terms glossary is a good starting point.

What Are the FY 2026-27 Tax Slabs?

For Tax Year 2026-27 (what most people still call FY 2026-27 / AY 2027-28), the new tax regime — the default regime under the Income-tax Act, 2025 — applies these slabs:

Thanks to the Section 87A-equivalent rebate (now Section 202 under the new Act), individuals with total income up to ₹12 lakh pay zero tax under the new regime. Salaried employees and pensioners get a further ₹75,000 standard deduction, pushing that effectively tax-free threshold up to ₹12.75 lakh. For a deeper breakdown of these exact slabs with additional examples, see our dedicated India income tax slabs for AY 2026-27 guide.

Why This Year Is Different: The Income-tax Act, 2025

Before getting into deductions and worked examples, it's worth understanding what actually changed structurally this year, since it affects how you should read every other tax resource going forward.

From 1 April 2026, the Income-tax Act, 2025 replaced the Income-tax Act, 1961, which had governed Indian taxation for over six decades. This isn't just a renumbering exercise — the new Act also discontinues the long-standing "previous year" and "assessment year" distinction that confused first-time taxpayers for generations, replacing both with a single, unified concept: the Tax Year.

Under the old system, income earned in FY 2026-27 would be assessed in AY 2027-28 — two different years for one block of income, which never made intuitive sense to most people filing for the first time. Under the new Act, that same income simply falls under Tax Year 2026-27, with no separate assessment year concept at all.

Why does this guide still mention AY 2027-28 prominently, then? Because search behavior and years of prior tax content still use that terminology heavily, and plenty of taxpayers will keep typing "AY 2027-28" out of habit for a while yet. Practically speaking: if you're researching your Tax Year 2026-27 obligations, "AY 2027-28" and "Tax Year 2026-27" are now referring to the same income and the same filing cycle — just described under two different legal frameworks.

Provisions that were previously well-known by their 1961 Act section numbers have also been renumbered. The rebate provision most people know as "Section 87A," for instance, is now Section 202 under the Income-tax Act, 2025 — same core benefit, new section number. Keep this in mind if you're cross-referencing older articles or forum discussions that still cite pre-2026 section numbers.

New Tax Regime: The Default Option for FY 2026-27

The new tax regime remains the default regime for individuals, HUFs, and most other assessee categories for Tax Year 2026-27, continuing the structure introduced in recent years. Here's the full slab breakdown again, with the mechanics of how it actually applies:

Each slab rate applies only to the portion of income within that specific bracket — this is a progressive system, not a flat rate applied to your entire income once you cross a threshold. Someone earning ₹18 lakh isn't taxed at 20% on the whole amount; they're taxed at 0%, 5%, 10%, 15%, and 20% on the respective slices of income that fall into each bracket.

If you'd rather see this applied automatically to your own salary figure than trace through the slab table manually, the India Income Tax Calculator: Old vs New Regime does exactly that comparison in one place.

Standard Deduction Under the New Regime

Salaried employees and pensioners opting for the new regime can claim a standard deduction of ₹75,000, which reduces gross salary before the slabs are applied. This is a meaningful jump from the ₹50,000 standard deduction available under the old regime, and it's a big part of why the new regime has become the more attractive default for a large share of salaried taxpayers.

The Section 202 (Formerly Section 87A) Rebate

This rebate is arguably the single most impactful provision for middle-income taxpayers under the current system. Resident individuals with total taxable income up to ₹12 lakh under the new regime receive a rebate of up to ₹60,000 — enough to bring their tax liability down to zero, even though tax is technically calculated using the slab rates first.

For salaried individuals, combining the ₹75,000 standard deduction with this rebate means gross salary income up to roughly ₹12.75 lakh can be effectively tax-free under the new regime.

Two important caveats worth flagging directly, since general summaries often skip them:

1. The rebate applies only to normal-rate income. Special-rate income — such as capital gains taxed under specific sections — isn't covered by this rebate, meaning you could still owe tax on that portion even if your total income sits around the ₹12 lakh mark.
2. The rebate is available only to resident individuals. Non-resident taxpayers don't qualify for this specific rebate under the new regime, regardless of their income level.

Marginal Relief: What Happens Just Above ₹12 Lakh

If your taxable income slightly exceeds ₹12 lakh, a marginal relief provision prevents the tax jump from being disproportionate to the small amount of extra income. In effect, if the additional tax owed above ₹12 lakh would exceed the additional income itself, your tax liability is capped at just the excess income amount — so a taxpayer earning ₹12,10,000, for instance, doesn't suddenly owe far more tax than someone earning exactly ₹12,00,000.

Old Tax Regime: Still Available, Still Relevant for Some

The old tax regime remains available for those who prefer it, typically taxpayers with significant deductions and exemptions to claim — HRA, Section 80C investments, home loan interest, and similar reliefs that the new regime largely doesn't allow.

Under the old regime, the tax-free threshold (via its own Section 87A-equivalent rebate) sits considerably lower — income up to ₹5 lakh can be effectively tax-free, compared to ₹12 lakh under the new regime. The trade-off is that the old regime allows a much broader range of deductions that can meaningfully lower taxable income before slabs even apply, something high-deduction taxpayers (large home loan interest, substantial 80C investments, HRA claims in expensive cities) may still find worthwhile despite the higher headline rates.

Choosing between the two regimes genuinely depends on your specific deduction profile — there's no universal "better" answer here, which is exactly why we've built a full new tax regime vs old tax regime comparison to walk through the decision in more depth, alongside the old vs new regime calculator for running your own numbers directly.

Real Worked Examples: What You'll Actually Pay

Numbers on a slab table only tell part of the story — here's how the math plays out at a few common income levels under the new regime.

Example 1: ₹12.75 Lakh Salaried Income

• Gross salary: ₹12,75,000
• Less standard deduction: ₹75,000
• Taxable income: ₹12,00,000
• Tax as per slabs: (₹4L × 0%) + (₹4L × 5%) + (₹4L × 10%) = ₹20,000 + ₹40,000 = ₹60,000
• Section 202 rebate: ₹60,000 (since taxable income doesn't exceed ₹12 lakh)
• Final tax payable: ₹0

Example 2: ₹20 Lakh Salaried Income

• Gross salary: ₹20,00,000
• Less standard deduction: ₹75,000
• Taxable income: ₹19,25,000
• Tax as per slabs: ₹20,000 (5% slab) + ₹40,000 (10% slab) + ₹60,000 (15% slab) + ₹65,000 (20% slab on the remaining ₹3,25,000) = ₹1,85,000
• No rebate applies (income exceeds ₹12 lakh threshold)
• Health & Education Cess at 4%: ₹7,400
• Final tax payable: approximately ₹1,92,400

Example 3: ₹25 Lakh Income (Non-Salaried, No Standard Deduction)

• Taxable income: ₹25,00,000
• Tax as per slabs: ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000 (25% slab) + ₹30,000 (30% slab on the excess ₹1,00,000 above ₹24L) = ₹3,30,000
• Health & Education Cess at 4%: ₹13,200
• Final tax payable: approximately ₹3,43,200

These examples make the progressive structure concrete: even at ₹25 lakh income, the effective tax rate is well below the 30% top marginal rate, because only the last slice of income is actually taxed at that top rate. For a walkthrough specifically built around salaried income scenarios like these, our guide to calculating income tax for salaried individuals in India covers several more income brackets in detail.

If you'd rather not run these calculations manually for your own exact income and deductions, the Income Tax Calculator and Salary Tax Calculator handle both regimes side by side, so you can compare your actual liability under each before deciding which to opt for.

Surcharge and Health & Education Cess

Beyond the basic slab tax, two additional layers apply once income crosses certain thresholds.

Surcharge applies to higher-income taxpayers, with rates that increase in steps as income rises — this applies under both regimes, though the maximum surcharge rate under the new regime is capped lower than under the old regime for very high incomes. Because surcharge thresholds and exact rates are the kind of detail that can shift with each Finance Act, confirm the current applicable rates directly against Income Tax Department guidance for your specific income bracket before finalizing any tax planning.

Health & Education Cess is a flat 4% applied on top of your calculated tax (plus surcharge, if applicable), under both the new and old regimes. This cess is consistent across regimes and income levels — the 4% rate itself is the detail worth reconfirming each year, since cess rates are set through the Finance Act and can theoretically change.

Income Tax Rates for Senior Citizens and Super Senior Citizens

Age-based tax treatment remains most relevant under the old regime, since the new regime's slab structure generally applies uniformly regardless of age.

Under the old regime:

• Senior citizens (60 to 80 years) typically benefit from a higher basic exemption threshold than general taxpayers
• Super senior citizens (80 years and above) generally receive the highest basic exemption threshold among individual taxpayer categories

Standard deduction treatment also differs slightly by regime and taxpayer category for pension income specifically — senior citizens with pension income should confirm their exact applicable standard deduction figure against current Income Tax Department guidance, since these figures are periodically revised.

Tax Treatment for Non-Resident Individuals

Non-resident Indians (NRIs) can opt for either the new or old tax regime, similar to resident individuals, but with a few structural differences worth knowing:

• NRIs are generally taxed only on income earned or received in India, rather than worldwide income
• The Section 202 rebate (formerly Section 87A) is specifically restricted to resident individuals, meaning NRIs don't qualify for this particular zero-tax benefit even if their India-sourced income falls under ₹12 lakh
• Certain deductions available to residents under the old regime may have different eligibility conditions for NRIs

If you're an NRI trying to determine your exact filing obligations, this distinction — no Section 202 rebate eligibility — is one of the most commonly overlooked details in generic tax-slab summaries, and it meaningfully changes the effective tax-free threshold compared to what a resident taxpayer would experience at the same income level.

Which Deductions Survive Under the New Regime?

One of the most persistent points of confusion is exactly which deductions remain available under the new regime, since it eliminated most — but not all — of the old regime's extensive deduction list.

Generally available under the new regime:

• Standard deduction (₹75,000 for salaried/pension income)
• Employer's contribution to NPS under specific provisions
• A limited set of other specific deductions

Generally NOT available under the new regime:

• Section 80C investments (PPF, ELSS, life insurance premiums, etc.)
• HRA exemption
• Section 80D health insurance premium deduction
• Home loan interest deduction on self-occupied property (in most cases)
• LTA (Leave Travel Allowance) exemption

This is precisely why the regime choice matters so much for taxpayers with substantial existing deductions — someone with a large home loan, significant 80C investments, and HRA claims may find the old regime's lower effective taxable income outweighs the new regime's lower headline rates, even though the new regime looks simpler on paper. If you're weighing Section 80C investment options specifically, our Section 80C deductions guide for 2026 breaks down which instruments qualify and current limits, and our NPS vs PPF comparison is useful if you're deciding where to direct retirement-linked 80C contributions under the old regime.

How to Choose Between the Old and New Regime

Rather than defaulting to whichever regime "sounds" better, run the actual comparison for your specific numbers:

1. Calculate your tax under the new regime using the slabs above, factoring in the standard deduction and Section 202 rebate if applicable
2. Calculate your tax under the old regime, factoring in every deduction and exemption you're actually eligible for and likely to claim
3. Compare the two final figures directly — not the headline rates, but your actual computed liability after all applicable deductions and rebates
4. Reassess annually, since your deduction profile (a new home loan, a lapsed insurance policy, a change in HRA eligibility) can shift which regime is more favorable from year to year

Salaried employees typically need to indicate their regime choice to their employer for TDS purposes, with a formal election process (via Form 10-IEA where applicable) required for certain categories of taxpayers who want to switch from the default regime. The old vs new regime calculator is built specifically to make this step-by-step comparison quick rather than something you work out by hand twice.

How Income Tax Differs From Wealth Tax and Other Levies

It's worth being clear that income tax, as covered in this guide, is distinct from other forms of taxation you might encounter as your income and assets grow — wealth-based levies, for instance, operate on entirely different principles and triggers than annual income taxation. Our income tax vs wealth tax comparison explains how these concepts differ conceptually, which is useful context if you're doing broader financial planning beyond just this year's return.

Common Misconceptions Worth Clearing Up

"AY 2027-28 is a different year from FY 2026-27." Under the previous system this distinction existed for a reason, but functionally, both terms now refer to the same block of income and the same filing cycle — the new Act's "Tax Year 2026-27" replaces this dual-year framework entirely.

"Income up to ₹12 lakh means I don't need to file a return." The Section 202 rebate reduces your tax liability to zero — it doesn't automatically exempt you from the filing requirement itself. Filing obligations depend on separate criteria, not just your final tax liability.

"The new regime is always better since income up to ₹12 lakh is tax-free." This holds true for taxpayers without significant deductions, but anyone with substantial home loan interest, 80C investments, or HRA claims should run both calculations before assuming the new regime wins by default.

"Section 87A no longer exists." The rebate concept itself continues under the new Act — it's simply renumbered as Section 202. The benefit and its core mechanics remain conceptually similar; only the section reference has changed.

Frequently Asked Questions

What are the income tax slabs for FY 2026-27?
Under the new regime: Nil up to ₹4 lakh, 5% from ₹4–8 lakh, 10% from ₹8–12 lakh, 15% from ₹12–16 lakh, 20% from ₹16–20 lakh, 25% from ₹20–24 lakh, and 30% above ₹24 lakh. See our full India income tax slabs breakdown for further detail.

How much income is tax-free in India in 2026-27?
Under the new regime, income up to ₹12 lakh is effectively tax-free due to the Section 202 rebate, and salaried individuals can extend this to roughly ₹12.75 lakh after the ₹75,000 standard deduction.

Which tax regime is better in FY 2026-27?
It depends entirely on your deduction profile. Taxpayers with minimal deductions generally benefit more from the new regime's lower rates and rebate; those with significant HRA, 80C, or home loan interest claims may still find the old regime more favorable after running both calculations. Our old vs new regime comparison guide walks through this decision step by step.

Is AY 2027-28 the same as Tax Year 2026-27?
Yes, functionally. The Income-tax Act, 2025 replaces the previous-year/assessment-year framework with a single "Tax Year" concept, so Tax Year 2026-27 refers to the same income and filing cycle that would previously have been split across FY 2026-27 and AY 2027-28.

Does Section 87A still apply for Tax Year 2026-27?
The rebate benefit continues, but it's now designated as Section 202 under the Income-tax Act, 2025, rather than Section 87A of the repealed 1961 Act.

How much tax do I pay on a ₹15 lakh salary?
After the ₹75,000 standard deduction, taxable income is ₹14,25,000. Tax as per slabs works out to roughly ₹1,08,750 before cess, since income exceeds the ₹12 lakh rebate threshold — plus 4% Health & Education Cess on top. Run your exact figure through the Salary Tax Calculator for a precise breakdown.

Do senior citizens get different tax slabs?
Under the new regime, slab structure is largely uniform regardless of age. Age-based differences (higher exemption thresholds) remain more relevant under the old regime specifically.

The Bottom Line

Tax Year 2026-27 brings a genuine structural shift — a new governing Act, renumbered provisions, and simplified terminology — but the core financial reality for most taxpayers is straightforward: the new regime's ₹12 lakh effective tax-free threshold (₹12.75 lakh for salaried employees) makes it the default winner for anyone without substantial deductions, while the old regime remains genuinely competitive for taxpayers with significant home loan interest, 80C investments, or HRA claims. Given how central the Section 202 rebate and standard deduction figures are to this year's calculations, confirm both directly against current Income Tax Department guidance before filing, since these are exactly the kind of figures that can shift with each Finance Act.

To see your exact liability under both regimes before deciding, run your numbers through the Income Tax Calculator, Salary Tax Calculator, or the dedicated Old vs New Regime Calculator. And if you're still weighing which regime fits your specific deduction profile, our detailed old regime vs new regime comparison, salaried income tax calculation guide, and Section 80C deductions guide walk through the decision with more worked examples than we could fit here.