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Guide · Income Tax

Section 115BAC — The New
(Default) Tax Regime

The concessional slab rates under Section 115BAC(1A), the Rs12 lakh zero-tax rebate under 87A, the Rs75,000 standard deduction, and exactly which deductions you give up to use it.

TaxClue Editorial Desk Updated 18 August 2026 5 min read 16 FAQs answered
FY 2025-26 · AY 2026-27 Default regime since FY 2023-24 CA reviewed
Quick Answer

Section 115BAC(1A) is the new, default tax regime (since FY 2023-24). It offers lower slab rates but disallows most Chapter VI-A deductions and exemptions. For FY 2025-26 (AY 2026-27), income up to Rs12,00,000 pays zero tax after the Section 87A rebate of up to Rs60,000; salaried individuals also get a Rs75,000 standard deduction, pushing the effective zero-tax salary to Rs12,75,000. You can still opt for the old regime.

Zero-tax income Rs12L
Std deduction Rs75K
87A rebate Rs60K
Surcharge cap 25%
FY 2025-26 · AY 2026-27

New Regime Slab Rates under Section 115BAC

These are the concessional slabs under Section 115BAC(1A) for FY 2025-26. Plus 4% Health & Education Cess on the tax; surcharge applies above Rs50 lakh and is capped at 25% under the new regime.

Total income slabTax rate
Up to Rs4,00,000Nil
Rs4,00,001 – Rs8,00,0005%
Rs8,00,001 – Rs12,00,00010%
Rs12,00,001 – Rs16,00,00015%
Rs16,00,001 – Rs20,00,00020%
Rs20,00,001 – Rs24,00,00025%
Above Rs24,00,00030%

Same slabs apply for FY 2026-27. See the full income tax slabs for old-regime rates.

Rebate only up to Rs12L — then a marginal-relief cliff

The 87A rebate is available only if total income does not exceed Rs12,00,000. Cross it and slab tax applies from Rs4L upward — but marginal relief caps the tax so you never pay more extra tax than the income above Rs12L. Special-rate income (STCG u/s 111A, LTCG u/s 112A) is taxed separately and the 87A rebate does NOT reduce tax on those gains.

Budget 2025

Section 87A Rebate & the Rs12.75L Zero-Tax Salary

A resident individual under the new regime gets a rebate of up to Rs60,000 under Section 87A when total income is Rs12,00,000 or less — wiping the tax to nil. Salaried taxpayers and pensioners add a Rs75,000 standard deduction, so a gross salary of Rs12,75,000 lands at Rs12,00,000 taxable and pays zero tax.

Salaried · Rs12,75,000 salary

Gross salaryRs12,75,000
Less: standard deduction(Rs75,000)
Taxable incomeRs12,00,000
Tax before rebateRs60,000
Less: 87A rebate(Rs60,000)
Tax payableRs0

Salaried · Rs16,00,000 salary

Gross salaryRs16,00,000
Less: standard deduction(Rs75,000)
Taxable incomeRs15,25,000
Tax (new regime)Rs1,18,750
Add: 4% cessRs4,750
Tax payableRs1,23,500

Not sure whether the old or new regime is cheaper for your salary and investments?

Let a CA compare & file →
Which to pick

Old Regime vs New Regime (115BAC)

Old

Old Regime

  • All deductions: 80C, 80D, 80E, 80G, HRA, LTA, 24(b) home-loan interest
  • Higher slab rates; basic exemption Rs2.5L
  • Best when your deductions are large (home loan + 80C + HRA)
  • Must opt out via Form 10-IEA
vs
New

New Regime · Default

  • Zero tax up to Rs12L income (Rs12.75L salary)
  • Only 80CCD(2), 80CCH, 80JJAA and standard deduction
  • Best when you claim few deductions
  • Applies automatically — no form needed

New regime suits you if

  • You have few investments / no home loan
  • Your total income is near or under Rs12 lakh
  • You want simple, proof-free filing
  • You are a high earner (surcharge capped at 25%)

Old regime may win if

  • You claim large 80C + 80D + 80E deductions
  • You pay high rent and claim HRA
  • You have a self-occupied home-loan interest of Rs2L
  • Combined deductions exceed roughly Rs8–10 lakh

How to opt out to the old regime

  • Salaried / no business income: choose the old regime each year in the ITR (Form 10-IEA) — you are never locked in.
  • Business / professional income: file Form 10-IEA before the ITR due date; once you switch back to old, you can return to new only once in your lifetime.

Compare both side by side in the old vs new regime guide or estimate your tax with the income tax calculator.

The trade-off

Deductions NOT Allowed vs Still Allowed

Choosing 115BAC means giving up most exemptions and Chapter VI-A deductions. A short list survives.

Deduction / exemptionOld regimeNew regime (115BAC)
Standard deduction (Rs75k new / Rs50k old)YesYes · Rs75k
80C — PPF, ELSS, LIC, home-loan principalYesNo
80D — health insurance premiumYesNo
80CCD(2) — employer NPS contributionYesYes
HRA — Section 10(13A) / LTA — 10(5)YesNo
24(b) — self-occupied home-loan interestYes · Rs2LNo
80CCH — Agniveer Corpus FundYesYes
80JJAA — additional employee costYesYes

The 87A rebate and standard deduction are available in both regimes; the rebate limit differs (Rs12L new / Rs5L old).

Income-tax Act, 2025 renumbering

From AY 2026-27 the Income-tax Act, 2025 renumbers the statute. The familiar "Section 115BAC" concessional regime carries over (mapped to Section 202 of the new Act), but the well-known number 115BAC remains the way most taxpayers and software refer to it. Rates, the Rs12L rebate and disallowed deductions are unchanged.

Government sourcesSlabs & 87A rebate: incometax.gov.in · Section 115BAC(1A), Income-tax Act 1961 · Finance Act 2025 — new-regime slabs & Rs60,000 rebate up to Rs12L · Standard deduction Rs75,000 — Section 16(ia) (new regime)
People also ask

Section 115BAC — Frequently Asked Questions

Basics
What is Section 115BAC?
Section 115BAC of the Income-tax Act, 1961 is the new, concessional tax regime for individuals and HUFs. Sub-section (1A) sets the current slab rates. It offers lower rates than the old regime but disallows most exemptions and Chapter VI-A deductions. Since FY 2023-24 it is the default regime — it applies automatically unless you opt for the old regime.
Is the new tax regime mandatory?
No. Section 115BAC is the default from FY 2023-24, but it is not compulsory. Salaried individuals and pensioners can choose the old regime every year in their ITR (via Form 10-IEA). Taxpayers with business or professional income who switch back to old can return to the new regime only once in their lifetime.
What are the slab rates under 115BAC for FY 2025-26?
Up to Rs4,00,000: Nil; Rs4,00,001–Rs8,00,000: 5%; Rs8,00,001–Rs12,00,000: 10%; Rs12,00,001–Rs16,00,000: 15%; Rs16,00,001–Rs20,00,000: 20%; Rs20,00,001–Rs24,00,000: 25%; above Rs24,00,000: 30%. Add 4% Health & Education Cess. The same slabs apply for FY 2026-27.
Rebate & zero tax
What is the 87A rebate under the new regime for FY 2025-26?
Under the new regime a resident individual gets a rebate of up to Rs60,000 under Section 87A if total income does not exceed Rs12,00,000. This makes tax nil up to Rs12 lakh of income. The standard deduction of Rs75,000 for salaried taxpayers pushes the effective zero-tax gross salary to Rs12,75,000.
Is income up to Rs12 lakh really tax-free?
Yes, for total income up to Rs12,00,000 the 87A rebate wipes out the tax entirely under the new regime for FY 2025-26. For salaried people the Rs75,000 standard deduction means a gross salary of Rs12,75,000 becomes Rs12,00,000 taxable and pays zero tax. Cross Rs12 lakh and normal slab tax applies (with marginal relief just above the limit).
Does the 87A rebate apply to capital gains?
No. The 87A rebate reduces tax on normally-taxed income only. It does not reduce tax on special-rate income such as short-term capital gains under Section 111A (20% on listed equity) or long-term capital gains under Section 112A (12.5% above the Rs1.25 lakh exemption). Tax on those gains is payable even if your other income is under Rs12 lakh.
What is marginal relief above Rs12 lakh?
If your income is only slightly above Rs12,00,000, marginal relief ensures the extra tax you pay does not exceed the income earned above Rs12 lakh. So at, say, Rs12,10,000 you pay roughly Rs10,000 tax (plus cess), not the full slab tax. It smooths the jump caused by losing the 87A rebate.
Deductions
Can I claim 80C deductions under Section 115BAC?
No. Under the new regime, Section 80C (PPF, ELSS, LIC, home-loan principal, tuition fees) is not available, and neither are most other Chapter VI-A deductions like 80D, 80E and 80G. If maximising these matters, the old regime may suit you better. The Section 80C limit of Rs1.5 lakh applies only in the old regime.
Which deductions are still allowed under the new regime?
The standard deduction of Rs75,000 (salaried/pensioners), Section 80CCD(2) employer NPS contribution (14% of basic for government employees, 14% for private since Budget 2024), Section 80CCH (Agniveer Corpus Fund), Section 80JJAA (additional employee cost for businesses), and home-loan interest on a let-out property under 24(b). Most personal deductions are not allowed.
Is HRA exempt under the new tax regime?
No. House Rent Allowance exemption under Section 10(13A) is not available under the new regime, and neither is Leave Travel Allowance under Section 10(5). If you pay high rent and rely on HRA, compare with the old regime — it may be cheaper for you.
Can I claim home loan interest under 115BAC?
For a self-occupied house, the Section 24(b) interest deduction (up to Rs2 lakh) is NOT allowed under the new regime. For a let-out property, interest under 24(b) is allowed but the resulting house-property loss cannot be set off against other income heads under the new regime.
Old vs new
How do I choose between the old and new regime?
Compare your total deductions against the new-regime benefit. As a rule of thumb, if your combined deductions (80C + 80D + HRA + Rs2L home-loan interest, etc.) exceed roughly Rs8–10 lakh, the old regime often wins; otherwise the new regime is usually cheaper. Use the income tax calculator or let a CA run both scenarios before filing.
How do I opt out of the new regime to the old one?
Salaried individuals simply select the old regime in the ITR each year (Form 10-IEA). Taxpayers with business or professional income must file Form 10-IEA before the ITR due date; once they switch back to old, they can return to the new regime only once in their lifetime.
Rates & surcharge
What is the surcharge cap under the new regime?
Under the new regime the surcharge on income above Rs5 crore is capped at 25% (versus up to 37% in the old regime). This brings the maximum marginal rate to about 39% (30% + 25% surcharge + 4% cess), compared with roughly 42.74% under the old regime.
Does the new regime apply to FY 2026-27 as well?
Yes. The Section 115BAC slab rates, the Rs60,000 87A rebate up to Rs12 lakh, and the Rs75,000 standard deduction continue for FY 2026-27 (AY 2027-28). The Income-tax Act, 2025 renumbers the statute from AY 2026-27 but the concessional regime and its numbers carry over unchanged.
Can HUFs and firms use Section 115BAC?
Section 115BAC(1A) applies to individuals and Hindu Undivided Families (HUFs). Companies and firms are taxed under separate provisions. An eligible HUF opts in or out just like an individual, subject to the same disallowance of most deductions.
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