Income Tax Slab Rates for Financial Year 2026-27 (Assessment Year 2027-28)
India operates a dual tax regime system — taxpayers can choose between the Old Regime (with exemptions and deductions like 80C, 80D, HRA, LTA) or the New Regime (lower rates but most exemptions removed). Since Budget 2023, the New Regime is the DEFAULT regime — if you do not actively choose the Old Regime, the New Regime automatically applies. Understanding both regimes and calculating which one saves you more tax is essential before filing your ITR.
New Regime Tax Slabs — Section 115BAC (Default)
The New Regime (enhanced by Budget 2025) offers lower tax rates with a simplified structure:
| Income Range | Tax Rate |
|---|---|
| Up to Rs. 4,00,000 | Nil |
| Rs. 4,00,001 — Rs. 8,00,000 | 5% |
| Rs. 8,00,001 — Rs. 12,00,000 | 10% |
| Rs. 12,00,001 — Rs. 16,00,000 | 15% |
| Rs. 16,00,001 — Rs. 20,00,000 | 20% |
| Rs. 20,00,001 — Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
Key benefits of New Regime:
(a) Standard deduction: Rs. 75,000 for salaried individuals (increased from Rs. 50,000 by Budget 2024)
(b) Section 87A rebate: Full rebate for total income up to Rs. 12 lakh (net tax = ZERO for income up to Rs. 12 lakh). This was the blockbuster announcement of Budget 2025 — effectively making income up to Rs. 12 lakh completely TAX-FREE under the New Regime.
(c) No tax planning required: No need to invest in 80C instruments, buy health insurance for tax purposes, or claim HRA — rates are inherently lower.
What you LOSE in New Regime:
Most exemptions and deductions are NOT available: Section 80C (Rs. 1.5 lakh — PPF, ELSS, LIC, tuition fees), Section 80D (health insurance), HRA exemption (Section 10(13A)), LTA (Section 10(5)), Section 80E (education loan interest), Section 80G (donations), home loan interest deduction under Section 24(b) (Rs. 2 lakh for self-occupied), and most other Chapter VI-A deductions.
Exceptions (allowed in BOTH regimes): Employer's NPS contribution (Section 80CCD(2) up to 14% of salary), standard deduction of Rs. 75,000, Section 80JJAA (new employment), Section 80CCH (Agniveer).
Old Regime Tax Slabs (Optional — Must Be Actively Chosen)
| Income Range | Tax Rate |
|---|---|
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 — Rs. 5,00,000 | 5% |
| Rs. 5,00,001 — Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Old Regime benefits: All exemptions and deductions available — 80C (Rs. 1.5 lakh), 80D (Rs. 25,000-1 lakh), HRA, LTA, Section 24(b) home loan interest (Rs. 2 lakh), 80E, 80G, 80EE/80EEA, professional tax, and more. For taxpayers with significant deductions (home loan + 80C + 80D + HRA): Old Regime can be significantly cheaper.
Surcharge and Cess
Surcharge (applicable in BOTH regimes):
| Total Income | Surcharge Rate (New Regime) | Surcharge Rate (Old Regime) |
|---|---|---|
| Up to Rs. 50 lakh | Nil | Nil |
| Rs. 50 lakh — Rs. 1 crore | 10% | 10% |
| Rs. 1 crore — Rs. 2 crore | 15% | 15% |
| Above Rs. 2 crore | 25% | 25% |
| Above Rs. 5 crore | 25% (capped — no 37% under New Regime) | 37% |
Note: New Regime caps surcharge at 25% — the old 37% surcharge on income above Rs. 5 crore does NOT apply under New Regime. This makes the New Regime better for ultra-high-income individuals.
Health and Education Cess: 4% on (tax + surcharge) — applicable in both regimes.
Practical Comparison — Which Regime Saves More?
Scenario 1: Salaried Employee — Income Rs. 12 Lakh, No Investments
New Regime: Income Rs. 12 lakh - standard deduction Rs. 75,000 = taxable Rs. 11.25 lakh. Since total income ≤ Rs. 12 lakh: Section 87A rebate applies. Tax = ZERO.
Old Regime: Income Rs. 12 lakh - standard deduction Rs. 50,000 = Rs. 11.5 lakh. Tax: Rs. 0 (up to Rs. 2.5 lakh) + Rs. 12,500 (Rs. 2.5-5 lakh at 5%) + Rs. 1,00,000 (Rs. 5-10 lakh at 20%) + Rs. 45,000 (Rs. 10-11.5 lakh at 30%) = Rs. 1,57,500. Less Section 87A rebate (only if taxable ≤ Rs. 5 lakh — not applicable here). Tax = Rs. 1,57,500 + cess = Rs. 1,63,800.
New Regime wins by Rs. 1,63,800.
Scenario 2: Salaried Employee — Income Rs. 20 Lakh, Heavy Investments
Deductions available in Old Regime: 80C Rs. 1.5 lakh + 80D Rs. 25,000 + HRA Rs. 1.8 lakh + home loan interest Rs. 2 lakh + NPS Rs. 50,000 + standard deduction Rs. 50,000 = Total Rs. 6.55 lakh.
Old Regime: Taxable income = Rs. 20 lakh - Rs. 6.55 lakh = Rs. 13.45 lakh. Tax = Rs. 0 + Rs. 12,500 + Rs. 1,00,000 + Rs. 1,03,500 (Rs. 10-13.45 lakh at 30%) = Rs. 2,16,000 + cess = Rs. 2,24,640.
New Regime: Taxable income = Rs. 20 lakh - Rs. 75,000 (standard deduction) = Rs. 19.25 lakh. Tax = Rs. 0 + Rs. 20,000 + Rs. 40,000 + Rs. 60,000 + Rs. 65,000 (Rs. 16-19.25 lakh at 20%) = Rs. 1,85,000 + cess = Rs. 1,92,400.
New Regime wins by Rs. 32,240 — even with Rs. 6.55 lakh of deductions in Old Regime!
Scenario 3: Senior Citizen — Income Rs. 8 Lakh, Heavy 80D
Senior citizen (60-80 years): Old Regime basic exemption Rs. 3 lakh. Deductions: 80C Rs. 1.5 lakh + 80D Rs. 50,000 (senior citizen + parents senior citizen Rs. 1 lakh total) + standard deduction Rs. 50,000.
Old Regime: Taxable = Rs. 8 lakh - Rs. 3 lakh deductions = Rs. 5 lakh. Tax on Rs. 5 lakh (senior citizen slab): Rs. 0 (up to Rs. 3 lakh) + Rs. 10,000 (Rs. 3-5 lakh at 5%) = Rs. 10,000. Section 87A rebate: Rs. 10,000 (taxable ≤ Rs. 5 lakh). Tax = ZERO.
New Regime: Taxable = Rs. 8 lakh - Rs. 75,000 = Rs. 7.25 lakh. Tax = Rs. 0 + Rs. 16,250 (Rs. 4-7.25 lakh at 5%) = Rs. 16,250 + cess = Rs. 16,900. Section 87A rebate applies only if income ≤ Rs. 12 lakh (YES): Tax = ZERO.
Both regimes: ZERO tax. Senior citizens with income up to Rs. 12 lakh pay zero tax in both regimes.
How to Choose Your Regime — Filing Process
Salaried individuals: Inform your employer at the beginning of the FY (April) which regime you choose — this determines TDS computation. You can switch at the time of filing ITR (final choice). For salaried: you can switch between regimes every year.
Business/professional income: Once you choose the Old Regime by filing Form 10-IE: you can switch back to New Regime, but the option is available only ONCE. After switching out and back: you cannot go to Old Regime again. For business income: the choice is more permanent.
Default: If you do not file Form 10-IE or do not inform your employer: New Regime applies automatically.
Tax on Special Incomes (Same in Both Regimes)
| Income Type | Tax Rate |
|---|---|
| Short-term capital gains (equity — Section 111A) | 20% |
| Long-term capital gains (equity — Section 112A) | 12.5% (above Rs. 1.25 lakh exemption) |
| LTCG on other assets (Section 112) | 12.5% (no indexation post-Budget 2024) |
| STCG on other assets | Slab rates |
| Lottery/game show/online gaming | 30% |
| Virtual digital assets (crypto — Section 115BBH) | 30% |