Key Highlights
- Under the New Tax Regime (Section 202, ITA 2025), zero tax is payable on income up to ₹12,00,000 after Section 157 rebate
- Salaried individuals get an additional ₹75,000 standard deduction — making effective zero-tax limit ₹12,75,000
- New regime has 6 tax slabs ranging from 5% to 30%
- New Tax Regime is the default regime from Tax Year 2026-27; Old Regime requires opt-in
- Old Tax Regime (with 80C, 80D, HRA etc.) still available on opt-in — beneficial for those with large deductions
- Surcharge and 4% Health & Education Cess apply on top of base tax
- Corporate tax rates unchanged: 22% (existing companies), 15% (new manufacturing), 25% (certain companies)
1. Overview
Every year, the Finance Minister presents the Union Budget which, among other things, sets the income tax slabs and rates for the coming financial year. For Tax Year 2026-27 (income earned from 1 April 2026 to 31 March 2027), two regimes are available — the New Tax Regime under Section 202 of the Income Tax Act, 2025, and the Old Tax Regime.
The Union Budget 2025-26, presented on 1 February 2025, significantly enhanced the New Tax Regime by raising the zero-tax limit to ₹12 lakh through an increased Section 87A rebate (now Section 157 under ITA 2025). This was the most significant change to individual income tax in many years and made the New Regime even more attractive for middle-income taxpayers.
This guide covers every slab, rate, surcharge, and cess applicable for Tax Year 2026-27 — with complete calculation examples for different income levels.
2. New Tax Regime: Income Tax Slabs for Tax Year 2026-27
Under Section 202 of the Income Tax Act, 2025, the following slab rates apply for individuals, HUF, AOP, BOI, and Artificial Juridical Persons who opt for (or remain in) the New Tax Regime:
| Total Income (₹) | Tax Rate | Tax on This Slab |
|---|---|---|
| Up to ₹4,00,000 | NIL | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | Up to ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | Up to ₹40,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | Up to ₹60,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | Up to ₹80,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | Up to ₹1,00,000 |
| Above ₹24,00,000 | 30% | On amount above ₹24L |
Plus: 4% Health & Education Cess on tax payable. Plus surcharge where applicable.
3. Old Tax Regime: Income Tax Slabs for Tax Year 2026-27
The Old Tax Regime is still available on opt-in basis. Under it, taxpayers can claim deductions like Section 123 (80C equivalent), Section 126 (80D equivalent), HRA, LTA, and other exemptions — but at higher base slab rates:
| Category | 0% Slab | 5% Slab | 20% Slab | 30% Slab |
|---|---|---|---|---|
| Individuals below 60 years | Up to ₹2.5L | ₹2.5L – ₹5L | ₹5L – ₹10L | Above ₹10L |
| Senior Citizens (60–79 years) | Up to ₹3L | ₹3L – ₹5L | ₹5L – ₹10L | Above ₹10L |
| Super Senior Citizens (80+ years) | Up to ₹5L | NIL | ₹5L – ₹10L | Above ₹10L |
The Section 87A rebate under old regime provides ₹12,500 rebate for income up to ₹5 lakh — effectively making income up to ₹5 lakh zero-tax in the old regime as well.
4. New Regime vs Old Regime: Which is Better?
The answer depends on your deductions. As a general thumb rule:
| Income Level | Better Regime | Reason |
|---|---|---|
| Up to ₹7 lakh | New Regime | Zero tax under new regime; old regime also zero after rebate but with restrictions |
| ₹7L – ₹12L, low deductions | New Regime | Lower rates without needing to invest/park money |
| ₹12L – ₹15L, deductions > ₹3.75L | Old Regime | Deductions reduce taxable income enough to beat new regime |
| Above ₹15L, large deductions (80C + 80D + HRA) | Old Regime (often) | Large deduction stack can save more than rate advantage of new regime |
| Business income, no deductions | New Regime | No benefit of old regime without investable deductions |
5. Complete Tax Calculation Examples
All examples below are illustrative only.
Example 1: Salaried Employee, Income ₹12,75,000 (New Regime)
| Particulars | Amount (₹) |
|---|---|
| Gross Salary | 12,75,000 |
| Less: Standard Deduction (Section 16) | (75,000) |
| Taxable Income | 12,00,000 |
| Tax on ₹12,00,000 (slab-wise) | — |
| 0 – 4,00,000: NIL | 0 |
| 4,00,001 – 8,00,000: 5% of 4,00,000 | 20,000 |
| 8,00,001 – 12,00,000: 10% of 4,00,000 | 40,000 |
| Total Tax before Rebate | 60,000 |
| Less: Rebate u/s 157 (income ≤ ₹12L) | (60,000) |
| Tax Payable | ₹0 |
Result: Zero tax on gross salary of ₹12,75,000 for salaried employees under the new regime.
Example 2: Self-Employed Professional, Income ₹15,00,000 (New Regime)
| Particulars | Amount (₹) |
|---|---|
| Taxable Income (after presumptive deductions if applicable) | 15,00,000 |
| 0 – 4,00,000: NIL | 0 |
| 4,00,001 – 8,00,000: 5% | 20,000 |
| 8,00,001 – 12,00,000: 10% | 40,000 |
| 12,00,001 – 15,00,000: 15% | 45,000 |
| Total Tax | 1,05,000 |
| Add: 4% Health & Education Cess | 4,200 |
| Total Tax Payable | ₹1,09,200 |
Example 3: High-income Salaried, ₹25,00,000 (New Regime)
| Particulars | Amount (₹) |
|---|---|
| Gross Salary | 25,00,000 |
| Less: Standard Deduction | (75,000) |
| Taxable Income | 24,25,000 |
| 0 – 4,00,000: NIL | 0 |
| 4,00,001 – 8,00,000: 5% | 20,000 |
| 8,00,001 – 12,00,000: 10% | 40,000 |
| 12,00,001 – 16,00,000: 15% | 60,000 |
| 16,00,001 – 20,00,000: 20% | 80,000 |
| 20,00,001 – 24,00,000: 25% | 1,00,000 |
| 24,00,001 – 24,25,000: 30% of 25,000 | 7,500 |
| Total Tax | 3,07,500 |
| Add: 4% Cess | 12,300 |
| Total Tax Payable | ₹3,19,800 |
6. Surcharge Rates for Tax Year 2026-27
| Total Income | Surcharge Rate (New Regime) | Surcharge Rate (Old Regime) |
|---|---|---|
| Up to ₹50 lakh | NIL | NIL |
| ₹50L – ₹1 crore | 10% | 10% |
| ₹1 crore – ₹2 crore | 15% | 15% |
| ₹2 crore – ₹5 crore | 25% | 25% |
| Above ₹5 crore | 25% | 37% |
Note: Under the New Tax Regime, the maximum surcharge on all income (including capital gains) is capped at 25%. Under the Old Regime, surcharge on certain incomes can go up to 37%.
7. Corporate Tax Rates for Tax Year 2026-27
| Company Type | Section (ITA 2025) | Tax Rate |
|---|---|---|
| Domestic Company (general) | Section 199 | 30% |
| Domestic Company (turnover ≤ ₹400 crore in FY 2021-22) | Section 199 | 25% |
| Domestic Company opting for concessional rate | Section 200 | 22% + 10% surcharge + 4% cess = 25.17% |
| New Manufacturing Company (set up after 1 Oct 2019, commenced before 31 Mar 2024) | Section 201 | 15% + 10% surcharge + 4% cess = 17.01% |
| Foreign Company | Section 199 | 40% |
| MAT (Book Profit Tax) | Section 206 | 15% of book profit |
8. Marginal Relief on Surcharge
Marginal relief is available to ensure that the increase in tax due to surcharge does not exceed the increase in income. For example, if your income is ₹51 lakh and the additional ₹1 lakh triggers 10% surcharge, the marginal relief ensures you do not pay more additional tax than the additional income earned. This applies in both regimes.
9. How to Choose Between New and Old Regime
- Calculate your total eligible deductions: 80C (₹1.5L max → Section 123), 80D (₹25K/50K → Section 126), HRA, LTA, etc.
- Calculate taxable income under old regime after all deductions
- Calculate tax under old regime slabs
- Calculate taxable income under new regime (standard deduction of ₹75,000 only for salaried)
- Calculate tax under new regime slabs
- Compare — choose whichever is lower
- Submit declaration to employer at start of financial year (Form 12BAA)
10. When to Opt for Old Regime (Still Worth It?)
For a salaried employee aged below 60 years with income of ₹15 lakh, the old regime becomes beneficial if total deductions exceed approximately ₹3,75,000. This deduction stack could include:
- Section 123 (80C): ₹1,50,000 (PPF, ELSS, LIC, home loan principal)
- Section 126 (80D): ₹25,000 (health insurance)
- HRA Exemption: ₹1,00,000+ (if renting)
- Home Loan Interest (Section 24): ₹2,00,000
- Standard Deduction: ₹50,000 (old regime) vs ₹75,000 (new regime)
11. Latest Updates & Amendments
- Union Budget 2025-26 (1 Feb 2025): New regime zero-tax limit raised to ₹12 lakh via enhanced rebate
- Standard Deduction: Increased from ₹50,000 to ₹75,000 for salaried in new regime (Finance Act 2024, effective from Tax Year 2024-25 onwards)
- ITA 2025: New regime is now Section 202; old regime is default opt-out; rebate is Section 157
- Surcharge cap: New regime surcharge capped at 25% on all income types
- Tax Year 2026-27 is the first year governed by the ITA 2025; rates set by Finance Act 2025
12. Penalties for Non-Payment of Advance Tax
- Interest under Section 418: 1% per month if advance tax paid is less than 90% of assessed tax
- Interest under Section 419: 1% per month on shortfall in each instalment
- Advance tax is payable in 4 instalments: 15 June (15%), 15 September (45%), 15 December (75%), 15 March (100%)
13. Why TaxClue
Choosing between the new and old regime, computing advance tax, and optimising deductions requires careful analysis of your specific income and investment profile. TaxClue's Chartered Accountants help you run a regime comparison, choose optimally, and ensure correct TDS deduction from salary. Contact us for a personalised tax analysis for Tax Year 2026-27.
14. Our Process
- Collect income details — salary, business, capital gains, other sources
- List all available deductions and exemptions
- Run new regime vs old regime comparison computation
- Recommend optimal regime and submit declaration to employer if needed
- Compute advance tax schedule and ensure timely payment
- File ITR for Tax Year 2026-27 with chosen regime
15. Case Studies
All case studies below are illustrative only.
Case 1 — Anita, Software Engineer, Pune, Salary ₹14 lakh: Anita had been diligently investing in PPF (₹1.5L), paying health insurance (₹25K), and claiming HRA (₹72K). Her total deductions under old regime were ₹3.22 lakh. TaxClue ran a comparison: new regime tax = ₹98,800 (after cess); old regime tax = ₹88,400 (after cess). Old regime saved her ₹10,400 — but came with the investment lock-in. TaxClue helped her decide based on her liquidity needs.
Case 2 — Rajiv, Freelance Consultant, Delhi, Income ₹20 lakh: Rajiv had minimal investments — only ₹50,000 in PPF. TaxClue showed him that with no HRA, no home loan, and minimal 80C, the new regime was clearly better — saving him ₹47,000 in tax compared to old regime.
16. Related Services
- ITR Filing for Tax Year 2026-27
- New Regime vs Old Regime Analysis
- Advance Tax Computation and Deposit
- TDS on Salary Optimisation (Form 12BAA)
- Tax Planning and Investment Advisory
17. Resources & Checklist
- ☐ Collect Form 16 / salary slips for Tax Year 2026-27
- ☐ List all investments for 80C, 80D, NPS etc.
- ☐ Run new vs old regime comparison before 1 April 2026
- ☐ Submit Form 12BAA to employer if opting for old regime
- ☐ Pay advance tax by due dates if applicable
- ☐ File ITR by 31 July 2027 for Tax Year 2026-27
18. Contact Us
Your income tax liability for Tax Year 2026-27 depends on your income, deductions, and regime choice. Let TaxClue help you compute the optimal tax position. Contact us for a personalised tax calculation and ITR filing support.