Income Tax Slabs for Tax Year 2026-27 — New Regime vs Old Regime Under the Income-tax Act, 2025

Last Updated: 15 April 2026  |  Applicable From: Tax Year 2026-27 (1 April 2026 onwards)  |  Reference: Income-tax Act, 2025 (30 of 2025), as amended by Finance Act, 2026

The Income-tax Act, 2025 — enacted as Act 30 of 2025 with Presidential assent on 21 August 2025 — is the first complete rewrite of direct tax law in India in over six decades. Its commencement, under Section 1(3), is a single, unconditional event on 1 April 2026. There is no chapter-wise appointed date. From the moment the clock turns over into tax year 2026-27, every income computation, every TDS trigger, every advance-tax instalment, every assessment, and — most visibly for the common taxpayer — every slab rate is governed by the new Act as amended by the Finance Act, 2026.

This guide is written for resident individuals, HUFs, salaried professionals, pensioners, small business owners and freelancers who need a single, complete reference for the tax year 2026-27 slab rates in both the default new regime and the opt-out old regime. It covers the structure of the slabs, rebate mechanics, standard deduction interactions, surcharge and cess, the break-even point between regimes, Form 10-IEA mechanics, and six worked examples at income levels from ₹8 lakh to ₹5 crore. If your existing understanding was built on the old AY/PY framework, read this document end-to-end — the legal terminology has changed.

Table of Contents

1. Commencement and the tax-year framework
2. New regime slab rates (default)
3. Old regime slab rates (opt-out)
4. The ₹60,000 rebate and the ₹12 lakh threshold
5. Standard deduction interaction
6. Senior citizens and super seniors
7. Surcharge, cess and effective rates
8. Side-by-side regime comparison
9. Break-even analysis — when is the old regime better?
10. Regime choice and Form 10-IEA mechanics
11. Six worked examples
12. Comparison with the repealed 1961 Act
13. Expert Insight
14. Key Takeaways
15. Frequently Asked Questions

1. Commencement and the tax-year framework

Before any slab calculation makes sense, the date anchors must be right. The Income-tax Act, 2025 was passed by Parliament in the Monsoon Session 2025 and received Presidential assent on 21 August 2025. Section 1(3) says the Act “shall come into force on the 1st day of April, 2026” — a single date, unconditional, with no enabling notification required. Contrast this with some recent tax legislation that was brought into force chapter by chapter. The 2025 Act is not like that. Every one of its 23 chapters and 536 sections goes live on 1 April 2026.

Because the Act bundles earning and assessment into a single tax year, the old mental model of “PY 2024-25 / AY 2025-26” is now a transitional reference only. Income earned from 1 April 2026 to 31 March 2027 is tax year 2026-27, and it is assessed under the 2025 Act. Any income earned on or before 31 March 2026 is governed by the repealed Income-tax Act, 1961 and its familiar previous-year/assessment-year framework. The slabs set out in this article therefore do not apply to FY 2025-26 salary — that year is the last year under the 1961 Act.

2. New regime slab rates (default)

The new regime is the statutory default for individuals, HUFs, AOPs, BOIs and artificial juridical persons. Unless you actively opt out, your tax is computed using these rates:

Three features of the new regime deserve emphasis. First, the first ₹4 lakh is tax-free — that is a straight 33% expansion of the earlier ₹3 lakh threshold. Second, the slabs are granular and monotonic: every ₹4 lakh tranche between ₹4 lakh and ₹24 lakh gets a distinct rate, which keeps the marginal-rate jumps smaller than under the old four-slab system. Third, the 30% top rate now starts at ₹24 lakh, compared with ₹10 lakh under the old regime — a huge shift in the upper middle-class tax burden.

3. Old regime slab rates (opt-out)

A resident individual (or HUF) may choose to be taxed under the old regime by filing Form 10-IEA. The old regime preserves the four-slab structure carried forward from the repealed 1961 Act:

Old-regime taxpayers continue to be eligible for the full suite of Chapter VI-A-equivalent deductions — Sec 80C (₹1.5 lakh), Sec 80D health insurance, Sec 80CCD(1B) extra NPS, HRA, LTA, and Sec 24(b) home loan interest up to ₹2 lakh. These are NOT available in the default new regime. For a comprehensive list see our guide to deductions under the Income-tax Act, 2025.

4. The ₹60,000 rebate and the ₹12 lakh threshold

The most politically visible feature of the new regime is the enhanced rebate. A resident individual whose total income does not exceed ₹12,00,000 is entitled to a rebate equal to the tax payable, subject to a cap of ₹60,000. Because the slab calculation on ₹12 lakh of income is exactly ₹60,000 (₹20,000 at 5% plus ₹40,000 at 10%), the rebate wipes out the entire liability. Income up to ₹12 lakh is therefore tax-free in absolute terms under the new regime.

Salaried individuals do better. Because the standard deduction of ₹75,000 comes off gross salary before the slab calculation starts, the gross salary at which total taxable income hits ₹12 lakh is ₹12,75,000. A salary earner with no other income and a ₹12.75 lakh CTC pays zero tax under the new regime.

The rebate rule is only available to resident individuals. HUFs, AOPs, BOIs, non-residents, partnership firms, LLPs and companies do not get it. For a deep dive into the rebate mechanics including marginal relief computation, see our dedicated article on the Section 87A rebate and the ₹12 lakh tax-free threshold.

5. Standard deduction interaction

The standard deduction of ₹75,000 (new regime) or ₹50,000 (old regime) is available to every salaried individual and every pensioner, without any bills, proof or employer confirmation. It is applied before the slab calculation to arrive at taxable salary. For family pensioners (dependants receiving pension after the original recipient’s death), a parallel standard deduction of ₹25,000 (new regime) or ₹15,000 (old regime) is deducted from family pension income chargeable under “other sources”. We explain the mechanics, including interactions with the rebate, in the dedicated standard deduction guide.

6. Senior citizens and super seniors

Under the old regime, the basic exemption limit for a resident senior citizen (60–79) is ₹3,00,000, and for a super senior (80+) it is ₹5,00,000. Under the new regime, those age-based exemptions are gone — every individual gets the same ₹4,00,000 nil-tax bracket. Counter-intuitively, seniors often end up better off under the new regime because the rebate pushes the nil-tax threshold to ₹12 lakh. A 70-year-old pensioner receiving ₹9 lakh of pension pays zero tax under the new regime, whereas the old regime would charge ~₹92,500 (before 80TTB interest relief).

However, seniors with substantial Sec 80D health insurance premiums (up to ₹50,000 deduction each for self and parent), Sec 80TTB interest of ₹50,000 on bank deposits, and LIC premiums under Sec 80C often tip the scales back toward the old regime. Always calculate both.

7. Surcharge, cess and effective rates

Surcharge under the new regime applies as follows:

• 10% on tax where total income is ₹50,00,001 to ₹1,00,00,000
• 15% on tax where total income is ₹1,00,00,001 to ₹2,00,00,000
• 25% on tax where total income is ₹2,00,00,001 to ₹5,00,00,000
• 25% on tax where total income exceeds ₹5,00,00,000 — the 37% top surcharge that existed under the old-regime structure has been abolished for new-regime taxpayers

Health and Education Cess at 4% is then applied to the sum of tax and surcharge. Marginal relief on surcharge ensures that the additional income over the threshold (₹50 lakh, ₹1 crore, ₹2 crore, ₹5 crore) does not trigger an increase in tax-plus-surcharge that exceeds the incremental income itself. For the full mechanics, see our dedicated article on surcharge and cess under the Income-tax Act, 2025.

8. Side-by-side regime comparison

9. Break-even analysis — when is the old regime better?

Because the new regime strips out most deductions in exchange for lower rates and a higher rebate threshold, the break-even point depends on how much deduction you can legitimately claim. The simple rule of thumb: for every ₹1 lakh of gross salary, you need roughly ₹30,000–₹50,000 of deductions under the old regime to match the new regime’s liability.

For most salaried professionals earning below ₹15 lakh, assembling ₹4 lakh+ of legitimate deductions requires a home loan (₹2 lakh interest), fully exhausted 80C (₹1.5 lakh), full 80D (₹25,000–₹75,000), 80CCD(1B) (₹50,000), and HRA — a combination available to only a minority. Above ₹30 lakh, the rate gap narrows and old-regime deductions have to clear ₹4.5 lakh to be worthwhile.

10. Regime choice and Form 10-IEA mechanics

The default is the new regime — no paperwork required. To opt out into the old regime, the taxpayer files Form 10-IEA electronically on or before the due date for return filing (31 July 2027 for non-audit individuals filing for tax year 2026-27; 31 October 2027 for audit cases).

There is an asymmetry in the lock-in:

• Salaried taxpayers with no business or professional income — free to choose new or old each year. Form 10-IEA (or its equivalent election) is effectively re-made at every return.
• Taxpayers with business or professional income — once they opt out of the new regime using Form 10-IEA, they can opt back into the new regime only once in their lifetime as a business-income assessee. After that single re-entry, they are locked in to the new regime unless they cease to have business income altogether.

Employees should communicate their regime choice to the employer at the start of the tax year so that TDS under Sec 192 is deducted on the correct base. Switching at filing time is always permitted but may result in a refund or a shortfall that must be regularised with a self-assessment payment.

11. Six worked examples

12. Comparison with the repealed Income-tax Act, 1961

The Income-tax Act, 2025 replaces the Income-tax Act, 1961 (43 of 1961). The repealed Act had 298 sections across 23 chapters; the 2025 Act has 536 sections in 23 chapters — the increase in section count is because long 1961 Act sections with multiple sub-provisions have been split into shorter, single-subject sections. The language is simpler, not the content. The dual-year “previous year / assessment year” framework has been replaced by the single tax year. For a detailed explainer of the structural differences, see our complete guide to the Income-tax Act, 2025.

For related topics, also see our articles on the ₹60,000 rebate, standard deduction, surcharge and cess, complete deductions guide, capital gains, and TDS rates for tax year 2026-27.

Expert Insight

Key Takeaways

• The Income-tax Act, 2025 commences on 1 April 2026; tax year 2026-27 is the first year it governs.
• New regime is the default; old regime requires Form 10-IEA.
• New regime nil-tax threshold: ₹12 lakh total income (rebate) or ₹12.75 lakh gross salary (after standard deduction).
• Seven slabs from Nil to 30%, with 30% starting only at ₹24 lakh.
• Old regime retains ₹2.5/₹3/₹5 lakh basic exemptions and the classic 5%/20%/30% structure.
• Surcharge caps at 25% under the new regime; the 37% top rate is abolished.
• Standard deduction ₹75,000 (new) / ₹50,000 (old); family pension ₹25,000 (new) / ₹15,000 (old).
• Senior citizen age-based exemptions apply only under the old regime; rebate often makes new regime better anyway.
• Break-even deductions needed for old regime to win: roughly ₹4–5 lakh for salaries of ₹15–30 lakh.
• Always compute both regimes before filing — one-size-fits-all advice is wrong.

Frequently Asked Questions

For a personalised regime calculation for your tax year 2026-27 return, contact Virtual Auditor or call +91 99622 60333.