If you're trying to figure out how much tax you'll owe this year, you're not alone — every tax season, this becomes one of the most searched questions in India. Under the new tax regime for AY 2026-27 (FY 2025-26), income up to ₹4 lakh is tax-free, with rates rising from 5% to 30% across income slabs. Thanks to the Section 87A rebate, taxpayers with income up to ₹12 lakh (₹12.75 lakh for salaried individuals, after the standard deduction) pay effectively zero tax.
This guide breaks down the complete income tax slab rate chart for AY 2026-27, compares the old and new regimes, explains rebates and surcharges, and answers the questions people ask most. Whether you're salaried, self-employed, or a senior citizen, you'll find a clear, no-jargon breakdown here.
What Are Income Tax Slabs?
Income tax slabs are income ranges set by the government, where each range is taxed at a different rate. India follows a progressive taxation system — meaning the more you earn, the higher the rate on your additional income. It's important to understand that you don't pay the highest rate on your entire income; only the portion falling within each slab is taxed at that slab's rate.
Since 2020, taxpayers in India can choose between two systems: the old tax regime, which allows a wide range of deductions and exemptions, and the new tax regime, which offers simpler, lower rates but fewer deductions. For AY 2026-27, the new regime remains the default option, though you can still opt for the old regime when filing your return.
New Tax Regime Slabs for AY 2026-27 (FY 2025-26)
The new regime, governed under Section 115BAC of the Income Tax Act, offers the following slab structure:
Up to ₹4,00,000 — Nil
₹4,00,001 – ₹8,00,000 — 5%
₹8,00,001 – ₹12,00,000 — 10%
₹12,00,001 – ₹16,00,000 — 15%
₹16,00,001 – ₹20,00,000 — 20%
₹20,00,001 – ₹24,00,000 — 25%
Above ₹24,00,000 — 30%
These slabs were introduced in Budget 2025 and confirmed unchanged in Budget 2026, so they continue to apply for both FY 2025-26 (AY 2026-27) and FY 2026-27 (AY 2027-28).
Old Tax Regime Slabs for AY 2026-27
If you choose to stick with the old regime — perhaps because you claim significant deductions like HRA, 80C investments, or home loan interest — here's how the slabs look:
Up to ₹2,50,000 — Nil
₹2,50,001 – ₹5,00,000 — 5%
₹5,00,001 – ₹10,00,000 — 20%
Above ₹10,00,000 — 30%
For resident senior citizens (60–79 years), the basic exemption limit under the old regime rises to ₹3 lakh, and for super senior citizens (80 years and above), it increases further to ₹5 lakh.
New Regime vs Old Regime: Which One Wins?
This is the single most common question every taxpayer asks. Here's a side-by-side comparison to make the decision easier:
Basic Exemption Limit — New Regime: ₹4 lakh | Old Regime: ₹2.5 lakh (₹3L/₹5L for seniors)
Tax Rate Structure — New Regime: Simplified, lower rates | Old Regime: Higher rates, more slabs
Deductions Allowed — New Regime: Very limited | Old Regime: Extensive (80C, 80D, HRA, etc.)
Standard Deduction — New Regime: ₹75,000 | Old Regime: ₹50,000
Best Suited For — New Regime: Those with few investments/deductions | Old Regime: Those with high deductions (home loan, insurance, PPF, etc.)
Default Regime — New Regime: Yes (unless opted out) | Old Regime: Must be actively selected
A common approach is: if your annual deductions (80C, 80D, HRA, home loan interest) add up to more than roughly ₹3.5–4 lakh, the old regime may work out cheaper. If your deductions are minimal, the new regime's lower rates and higher exemption typically save more.
Understanding the Section 87A Tax Rebate
The Section 87A rebate is what makes income up to ₹12 lakh completely tax-free under the new regime. Here's how it works in practice:
Suppose your gross annual salary is ₹12.75 lakh. You first claim the ₹75,000 standard deduction, bringing your taxable income down to ₹12 lakh. The tax on ₹12 lakh works out to ₹60,000 (nil on the first ₹4 lakh, 5% on the next ₹4 lakh = ₹20,000, and 10% on the next ₹4 lakh = ₹40,000). Because your taxable income is exactly ₹12 lakh, the Section 87A rebate cancels out this ₹60,000 liability entirely — meaning your final tax payable is zero.
This rebate only applies under the new tax regime, and only to taxpayers whose taxable income falls at or below the ₹12 lakh threshold. Cross that line even slightly, and you'll owe tax on the full slab structure (though marginal relief provisions can soften the jump).
Standard Deduction for Salaried Employees and Pensioners
Both regimes offer a standard deduction, but the amounts differ:
- New Regime: ₹75,000 standard deduction for salaried individuals and pensioners.
- Old Regime: ₹50,000 standard deduction.
This deduction is applied automatically against your gross salary before any other calculations, reducing your taxable income right at the start.
Surcharge Rates for AY 2026-27
Beyond the basic slab rates, individuals with higher incomes also pay a surcharge on their tax liability. The surcharge rates that apply once income crosses specified thresholds are:
₹50 lakh – ₹1 crore — 10% surcharge
₹1 crore – ₹2 crore — 15% surcharge
₹2 crore – ₹5 crore — 25% surcharge
Above ₹5 crore — 25% (new regime cap) / 37% (old regime)
Note that under the new tax regime, the surcharge is capped at 25%, even for the highest income bracket — a benefit that doesn't exist under the old regime, where it can go up to 37%. On top of tax and surcharge, a 4% health and education cess applies to the total liability under both regimes.
Income Tax Slabs for Senior Citizens and Super Senior Citizens
Age-based benefits are only available under the old tax regime; the new regime applies the same slabs to everyone regardless of age.
Senior citizens (60–79 years), old regime: Exemption limit of ₹3 lakh, with the same 5%, 20%, and 30% slab structure applying above that threshold.
Super senior citizens (80 years and above), old regime: Exemption limit of ₹5 lakh, offering the highest tax-free threshold among all categories.
If you're a senior citizen with modest additional income sources and significant deductions (medical insurance under 80D, for instance), the old regime's higher exemption limit combined with deductions can sometimes work out more favorably than the new regime's flat structure.
Deductions Still Available Under the Old Tax Regime
One reason many taxpayers stick with the old regime is the range of deductions it allows:
- Section 80C — up to ₹1.5 lakh for investments in PPF, ELSS, life insurance premiums, and more.
- Section 80D — deduction for health insurance premiums, varying by age and family coverage.
- HRA exemption — for salaried employees paying rent.
- Home loan interest — deduction under Section 24(b) for interest paid on housing loans.
- 80CCD(1B) — additional ₹50,000 for NPS contributions.
The new regime, by contrast, allows very few of these — mainly the standard deduction and employer's NPS contribution — which is precisely why it suits taxpayers who don't have substantial investment-linked deductions.
What Changed in Union Budget 2026?
The Finance Minister confirmed in Budget 2026 that the income tax slabs under the new regime remain unchanged from those announced in Budget 2025. No new slab revisions were introduced for FY 2026-27. One notable change outside the slab structure: the equalisation levy on digital transactions involving non-resident e-commerce operators has been abolished, aligning India's tax framework more closely with global trade norms — though this doesn't directly affect individual salary taxation.
For most salaried and self-employed individuals, this means the planning approach that worked for FY 2025-26 continues to apply for FY 2026-27 without major adjustments.
How to Calculate Your Income Tax: A Simple Example
Let's walk through a practical example under the new regime for someone earning ₹15 lakh annually.
- Gross income: ₹15,00,000
- Standard deduction: ₹75,000
- Taxable income: ₹14,25,000
Now apply the slab rates:
- ₹0 – ₹4 lakh: Nil
- ₹4 lakh – ₹8 lakh (₹4 lakh @ 5%): ₹20,000
- ₹8 lakh – ₹12 lakh (₹4 lakh @ 10%): ₹40,000
- ₹12 lakh – ₹14.25 lakh (₹2.25 lakh @ 15%): ₹33,750
Total tax before cess: ₹93,750 Add 4% health and education cess: ₹3,750 Final tax payable: ₹97,500
This step-by-step method applies to any income level — simply work through each slab band sequentially rather than applying one flat rate to your entire income.
Which Regime Should You Choose?
There's no universal answer here, since it depends entirely on your income composition and deduction eligibility. As a general guide:
- Choose the new regime if: You have few investments, no home loan, minimal insurance premiums, and prefer simplicity.
- Choose the old regime if: You actively invest in 80C instruments, pay significant home loan interest, claim HRA, or have high medical insurance premiums.
- Run the numbers both ways. Because everyone's deduction profile is different, the only reliable way to know which regime saves you more is to calculate your liability under both.
Since individual income sources, deductions, and family situations vary widely, this comparison should be treated as general guidance rather than a rigid rule — a good starting point is to calculate your actual liability under both regimes using an income tax calculator before deciding, or to try our dedicated old vs new regime comparison tool to see the exact difference for your income level.
How to File Your ITR for AY 2026-27
Once you've determined your regime and tax liability, filing your Income Tax Return (ITR) involves a few key steps:
- Gather documents — Form 16, bank interest statements, investment proofs (if opting for the old regime), and capital gains statements if applicable.
- Choose your ITR form — based on your income sources (salary, business, capital gains, etc.).
- Select your regime — remember, the new regime is default; you must actively opt for the old regime if you want it.
- Compute your tax liability — using the slab rates and any applicable rebate or deductions.
- File before the due date — to avoid late fees and interest under Sections 234A/234B/234C.
If your tax situation is straightforward — a single salary source with standard deductions — filing is often manageable on your own using the salary tax calculator to estimate your final numbers ahead of time. If you have multiple income sources, capital gains, or foreign income, consulting a tax professional is generally advisable.
Frequently Asked Questions
What is the income tax slab for AY 2026-27? Under the new regime for AY 2026-27, income up to ₹4 lakh is tax-free, followed by rates of 5%, 10%, 15%, 20%, 25%, and 30% across successive income bands, with income above ₹24 lakh taxed at the top 30% rate.
Is the new tax regime the default option for AY 2026-27? Yes. The new tax regime under Section 115BAC is the default option for AY 2026-27. If you want to be taxed under the old regime instead, you need to actively select it while filing your return.
What is the tax rebate limit under Section 87A for 2026-27? Under the new regime, the Section 87A rebate makes taxable income up to ₹12 lakh completely tax-free, which translates to a gross salary of up to roughly ₹12.75 lakh for salaried individuals after the standard deduction.
How much income is tax-free for salaried individuals in AY 2026-27? Salaried individuals can earn up to ₹12.75 lakh gross (₹12 lakh taxable after the ₹75,000 standard deduction) without paying any tax, due to the combined effect of the exemption limit and the Section 87A rebate.
What is the difference between old and new tax regime for FY 2025-26? The new regime offers a higher basic exemption (₹4 lakh vs ₹2.5 lakh) and simpler slabs but very limited deductions, while the old regime has a lower exemption threshold but allows deductions like 80C, 80D, and HRA that can significantly reduce taxable income for those with eligible investments.
Are income tax slabs different for senior citizens in AY 2026-27? Only under the old regime. Senior citizens (60-79) get a ₹3 lakh exemption limit, and super senior citizens (80+) get a ₹5 lakh limit. The new regime applies the same ₹4 lakh threshold to all age groups equally.
Final Thoughts
Understanding your income tax slab for AY 2026-27 doesn't have to be complicated. The new regime keeps things simple with a higher exemption limit and fewer calculations, while the old regime rewards those who actively invest and claim deductions. The right choice depends entirely on your personal financial picture — so before you file, it's worth running your numbers through both regimes to see which one actually saves you more.
For a deeper comparison of both systems, check out our detailed guide on the old tax regime vs new tax regime in India, or brush up on key terminology in our essential tax terms glossary for beginners. For official rates and updates, you can also refer to the Income Tax Department, Government of India.
Ready to see exactly what you owe? Use our free Income Tax Calculator to compute your AY 2026-27 tax liability in under two minutes — no sign-up required.