Quick Answer
12 min read|Updated: Apr 1, 2026|Income-tax
Quick Answer
For AY 2026-27, the new tax regime (default) offers seven slabs ranging from Nil to 30%, with a Section 87A rebate making income up to Rs 12 lakh completely tax-free (Rs 12.75 lakh for salaried individuals after standard deduction). The old regime retains the three-slab structure (5%/20%/30%) but allows deductions under Chapter VI-A including 80C, 80D, HRA, and home loan interest.
Surcharge Rates for AY 2026-27
Surcharge is an additional tax levied on the income tax for higher-income taxpayers. The Income Tax Act 2025 has capped the maximum surcharge at 25%, a reduction from the 37% maximum under the 1961 Act.
| Total Income | Surcharge Rate (Individuals/HUF) |
|---|---|
| Up to Rs 50 lakh | Nil |
| Rs 50 lakh to Rs 1 crore | 10% |
| Rs 1 crore to Rs 2 crore | 15% |
| Above Rs 2 crore | 25% |
Health & Education Cess
A Health and Education Cess of 4% is levied on the total of income tax plus surcharge. This cess applies uniformly to all taxpayers and is not deductible as an expense. The cess was introduced to fund primary education, secondary/higher education, and health infrastructure. The formula is: Total Tax = Income Tax + Surcharge + 4% Cess on (Income Tax + Surcharge).
Effective Tax Rate at Different Income Levels
The following table shows the total tax payable and effective tax rate at various income levels under the new regime. This helps taxpayers quickly assess their approximate tax burden. Note that these calculations assume only standard deduction for salaried and no other deductions.
| Total Income (after SD) | Income Tax | Cess (4%) | Total Tax | Effective Rate |
|---|---|---|---|---|
| Rs 5,00,000 | Rs 0 (rebate) | Rs 0 | Rs 0 | 0.00% |
| Rs 8,00,000 | Rs 0 (rebate) | Rs 0 | Rs 0 | 0.00% |
| Rs 10,00,000 | Rs 0 (rebate) | Rs 0 | Rs 0 | 0.00% |
| Rs 12,00,000 | Rs 0 (rebate) | Rs 0 | Rs 0 | 0.00% |
| Rs 15,00,000 | Rs 1,05,000 | Rs 4,200 | Rs 1,09,200 | 7.28% |
| Rs 20,00,000 | Rs 2,00,000 | Rs 8,000 | Rs 2,08,000 | 10.40% |
| Rs 25,00,000 | Rs 3,30,000 | Rs 13,200 | Rs 3,43,200 | 13.73% |
| Rs 50,00,000 | Rs 10,80,000 | Rs 43,200 | Rs 11,23,200 | 22.46% |
| Rs 1,00,00,000 | Rs 25,80,000 + surcharge | Varies | Rs 29,51,880* | 29.52%* |
*Includes 10% surcharge on income between Rs 50L and Rs 1Cr. Actual computation may vary due to marginal relief at surcharge thresholds.
New vs Old Regime Comparison Table
The following table provides a side-by-side comparison of tax payable under both regimes at various income levels. The old regime figures assume the taxpayer claims standard deduction of Rs 50,000 only (no other deductions), to show the base comparison. The actual benefit of the old regime depends on total deductions claimed.
| Gross Salary | New Regime Tax (incl. cess) | Old Regime Tax (SD only, incl. cess) | Savings Under New Regime |
|---|---|---|---|
| Rs 8,00,000 | Rs 0 | Rs 33,800 | Rs 33,800 |
| Rs 10,00,000 | Rs 0 | Rs 75,400 | Rs 75,400 |
| Rs 12,00,000 | Rs 0 | Rs 1,24,800 | Rs 1,24,800 |
| Rs 15,00,000 | Rs 97,500 | Rs 1,95,000 | Rs 97,500 |
| Rs 20,00,000 | Rs 1,82,000 | Rs 3,51,000 | Rs 1,69,000 |
| Rs 25,00,000 | Rs 3,19,800 | Rs 5,07,000 | Rs 1,87,200 |
New regime includes standard deduction of Rs 75,000. Old regime includes standard deduction of Rs 50,000 and no other deductions. All figures include 4% cess.
When to Choose Old vs New Regime — Breakeven Analysis
The decision between old and new regime depends entirely on the quantum of deductions and exemptions you can claim. The new regime offers lower tax rates but strips away most deductions. The old regime has higher rates but allows deductions. The breakeven point is the level of deductions at which both regimes result in equal tax liability.
Breakeven Deduction Thresholds (Approximate)
- Income Rs 10L: Old regime better only if deductions exceed Rs 3,75,000+ (beyond 80C limit for most people) — New regime almost always preferred
- Income Rs 12L: Old regime cannot beat new regime due to Rs 60,000 rebate — New regime strongly preferred
- Income Rs 15L: Old regime better if total deductions (beyond standard deduction) exceed approximately Rs 3,75,000
- Income Rs 20L: Old regime better if total deductions exceed approximately Rs 4,25,000
- Income Rs 25L: Old regime better if total deductions exceed approximately Rs 4,50,000
- Income Rs 50L: Old regime better if total deductions exceed approximately Rs 5,75,000
In practical terms, a salaried individual typically claims 80C (Rs 1.5L), 80D (Rs 25K-50K), HRA (varies), home loan interest under Section 24 (up to Rs 2L), and NPS under 80CCD(1B) (Rs 50K). If the total of these deductions exceeds the breakeven threshold, the old regime is advisable. For the complete list of deductions available under the old regime, see our comprehensive deductions guide.
Worked Example: Rs 15 Lakh Salary Income
Let us compute the tax for a salaried individual with a gross salary of Rs 15,00,000 under both regimes.
New Regime Computation
| Particulars | Amount (Rs) |
|---|---|
| Gross Salary | 15,00,000 |
| Less: Standard Deduction | (75,000) |
| Net Taxable Income | 14,25,000 |
| Tax: Up to Rs 4L @ Nil | 0 |
| Tax: Rs 4L to Rs 8L @ 5% | 20,000 |
| Tax: Rs 8L to Rs 12L @ 10% | 40,000 |
| Tax: Rs 12L to Rs 14.25L @ 15% | 33,750 |
| Total Income Tax | 93,750 |
| Add: Cess @ 4% | 3,750 |
| Total Tax Payable (New Regime) | 97,500 |
Old Regime Computation (with common deductions)
Assumptions: 80C = Rs 1,50,000; 80D = Rs 25,000; NPS 80CCD(1B) = Rs 50,000; Standard Deduction = Rs 50,000. Total deductions = Rs 2,75,000.
| Particulars | Amount (Rs) |
|---|---|
| Gross Salary | 15,00,000 |
| Less: Standard Deduction | (50,000) |
| Gross Total Income | 14,50,000 |
| Less: Section 80C | (1,50,000) |
| Less: Section 80D | (25,000) |
| Less: Section 80CCD(1B) | (50,000) |
| Net Taxable Income | 12,25,000 |
| Tax: Up to Rs 2.5L @ Nil | 0 |
| Tax: Rs 2.5L to Rs 5L @ 5% | 12,500 |
| Tax: Rs 5L to Rs 10L @ 20% | 1,00,000 |
| Tax: Rs 10L to Rs 12.25L @ 30% | 67,500 |
| Total Income Tax | 1,80,000 |
| Add: Cess @ 4% | 7,200 |
| Total Tax Payable (Old Regime) | 1,87,200 |
Verdict at Rs 15L: New regime saves Rs 89,700 (Rs 1,87,200 – Rs 97,500). Even with Rs 2.75L of deductions, the new regime is significantly cheaper. The old regime would need deductions exceeding Rs 3.75L to break even. Understanding salary income components helps optimize this decision — see our salary income taxation guide.
Worked Example: Rs 25 Lakh Salary Income
New Regime Computation
| Particulars | Amount (Rs) |
|---|---|
| Gross Salary | 25,00,000 |
| Less: Standard Deduction | (75,000) |
| Net Taxable Income | 24,25,000 |
| Tax: Up to Rs 4L @ Nil | 0 |
| Tax: Rs 4L to Rs 8L @ 5% | 20,000 |
| Tax: Rs 8L to Rs 12L @ 10% | 40,000 |
| Tax: Rs 12L to Rs 16L @ 15% | 60,000 |
| Tax: Rs 16L to Rs 20L @ 20% | 80,000 |
| Tax: Rs 20L to Rs 24L @ 25% | 1,00,000 |
| Tax: Rs 24L to Rs 24.25L @ 30% | 7,500 |
| Total Income Tax | 3,07,500 |
| Add: Cess @ 4% | 12,300 |
| Total Tax Payable (New Regime) | 3,19,800 |
Old Regime Computation (with extensive deductions)
Assumptions: 80C = Rs 1,50,000; 80D = Rs 50,000 (self + parents senior); NPS 80CCD(1B) = Rs 50,000; HRA exemption = Rs 1,80,000; Home loan interest 24(b) = Rs 2,00,000; Standard Deduction = Rs 50,000. Total deductions and exemptions = Rs 6,80,000.
| Particulars | Amount (Rs) |
|---|---|
| Gross Salary | 25,00,000 |
| Less: HRA Exemption | (1,80,000) |
| Less: Standard Deduction | (50,000) |
| Income from House Property (interest deduction) | (2,00,000) |
| Gross Total Income | 20,70,000 |
| Less: 80C + 80CCD(1B) + 80D | (2,50,000) |
| Net Taxable Income | 18,20,000 |
| Tax on Rs 18,20,000 (old slabs) | 3,59,000 |
| Add: Cess @ 4% | 14,360 |
| Total Tax Payable (Old Regime) | 3,73,360 |
Verdict at Rs 25L: Even with Rs 6.80L of deductions (a very aggressive claim including HRA and home loan interest), the new regime still saves Rs 53,560. The old regime becomes competitive only if deductions cross approximately Rs 7.5L+ at this income level, which typically requires both a significant HRA claim and full home loan interest deduction. Understanding house property income and deductions is essential for this analysis.
HUF Tax Slabs
Hindu Undivided Families (HUFs) are taxed at the same slab rates as individuals under both regimes. The key differences for HUFs are:
- HUFs are not eligible for the Section 87A rebate.
- HUFs do not get age-based higher exemption limits (no senior citizen benefit).
- HUFs can claim all Chapter VI-A deductions under the old regime.
- The Karta of the HUF is responsible for filing the return and paying tax.
Since HUFs cannot claim the Section 87A rebate, a HUF with income of Rs 10,00,000 under the new regime will have a tax liability of Rs 40,000 (Rs 20,000 at 5% + Rs 20,000 at 10%) plus cess, totalling Rs 41,600. In contrast, an individual with the same income pays nil tax. This makes the new regime comparatively less attractive for HUFs at lower income levels. Ensure you file the correct ITR form by referring to our ITR filing guide and pay advance tax on time.
Key Takeaways
- New regime is the default from AY 2026-27 — opt out specifically to use the old regime.
- New regime slabs: Nil/5%/10%/15%/20%/25%/30% with thresholds at Rs 4L/8L/12L/16L/20L/24L.
- Section 87A rebate of Rs 60,000 makes income up to Rs 12L tax-free under new regime.
- Salaried individuals earning up to Rs 12.75L pay nil tax (after Rs 75,000 standard deduction).
- Old regime offers three slabs (5%/20%/30%) with exemption at Rs 2.5L (Rs 3L for senior citizens, Rs 5L for super senior citizens).
- New regime is better for most taxpayers unless total deductions exceed Rs 3.75L to Rs 4.50L depending on income level.
- Maximum surcharge capped at 25% (down from 37% under 1961 Act).
- Health & Education Cess remains at 4% on tax plus surcharge.
- Salaried individuals (without business income) can switch between regimes every year.
Frequently Asked Questions
What are the income tax slabs for AY 2026-27 under the new regime?
Under the new regime for AY 2026-27: Nil tax up to Rs 4,00,000; 5% for Rs 4,00,001 to Rs 8,00,000; 10% for Rs 8,00,001 to Rs 12,00,000; 15% for Rs 12,00,001 to Rs 16,00,000; 20% for Rs 16,00,001 to Rs 20,00,000; 25% for Rs 20,00,001 to Rs 24,00,000; and 30% above Rs 24,00,000.
Is the new tax regime the default for AY 2026-27?
Yes. Under the Income Tax Act 2025, the new tax regime is the default regime. Taxpayers who wish to opt for the old regime must specifically exercise the option by filing a declaration before the due date of filing the return. If no option is exercised, the new regime applies automatically.
How much tax do I pay on Rs 12 lakh income under the new regime?
If your total income is Rs 12 lakh or below under the new regime, you pay zero tax due to the Section 87A rebate of Rs 60,000. For salaried individuals, the threshold is effectively Rs 12,75,000 after the Rs 75,000 standard deduction. The rebate completely eliminates the tax liability for income up to Rs 12 lakh.
What is the Section 87A rebate for AY 2026-27?
Under the new regime, Section 87A provides a rebate of up to Rs 60,000 for resident individuals whose total income does not exceed Rs 12,00,000. Under the old regime, the rebate is Rs 12,500 for income up to Rs 5,00,000. The rebate is available only to resident individuals and not to HUFs, firms, or companies.
What are the surcharge rates for AY 2026-27?
For individuals under both regimes: 10% surcharge on income between Rs 50 lakh and Rs 1 crore; 15% on Rs 1 crore to Rs 2 crore; 25% above Rs 2 crore. The maximum surcharge is capped at 25% under the Income Tax Act 2025. For companies, surcharge is 7% above Rs 1 crore and 12% above Rs 10 crore.
When should I choose the old regime over the new regime?
The old regime is beneficial if your total deductions and exemptions (80C, 80D, HRA, home loan interest, etc.) exceed approximately Rs 3.75 lakh to Rs 4.25 lakh for income levels between Rs 15 lakh and Rs 25 lakh. At lower income levels, the new regime is almost always better due to the enhanced rebate.
Are the tax slabs different for senior citizens under the new regime?
No. Under the new regime, the same slab rates apply to all individuals regardless of age. There is no separate basic exemption limit for senior citizens (60-80 years) or super senior citizens (80+ years) under the new regime. However, under the old regime, senior citizens enjoy a higher basic exemption of Rs 3,00,000 and super senior citizens get Rs 5,00,000.
What is the Health and Education Cess for AY 2026-27?
The Health and Education Cess is 4% and is levied on the total of income tax plus surcharge. This cess applies to all taxpayers including individuals, HUFs, firms, and companies. The cess cannot be claimed as a deduction while computing taxable income.
Do HUFs have different tax slabs than individuals?
No. Hindu Undivided Families (HUFs) are taxed at the same slab rates as individuals under both the new and old regimes. However, HUFs are not eligible for the Section 87A rebate, which is available only to resident individuals. HUFs also do not get the benefit of higher exemption limits available to senior and super senior citizens under the old regime.
What is marginal relief and when does it apply?
Marginal relief ensures that the additional tax (including surcharge) on income exceeding a threshold does not exceed the additional income itself. For example, if surcharge kicks in at Rs 50 lakh and your income is Rs 50,10,000, marginal relief ensures you don’t pay more additional tax than the Rs 10,000 excess income. Similar marginal relief applies at the Rs 12 lakh rebate threshold.
Can I switch between old and new regime every year?
Salaried individuals (without business or profession income) can switch between old and new regime every financial year. However, taxpayers with business or profession income can switch only once in their lifetime. Once they opt out of the new regime back to the old regime, they cannot return to the new regime in any subsequent year.
What is the effective tax rate at Rs 50 lakh income under the new regime?
At Rs 50 lakh income under the new regime, the income tax is Rs 10,80,000. With 4% cess, the total tax is Rs 11,23,200, giving an effective tax rate of approximately 22.46%. No surcharge applies as income is exactly Rs 50 lakh (surcharge kicks in above Rs 50 lakh).
