Section 115BAC — New Tax Regime Slab Rates & Rules (FY 2026-27)

Updated: 3 June 2026  |  Income-tax Act, 2025  |  Default Regime from FY 2023-24

New Tax Regime Slab Rates — FY 2026-27 (AY 2027-28)

Plus 4% Health & Education Cess on tax amount. Surcharge applies for income above ₹50 lakh (capped at 25% under new regime).

Section 87A Rebate Under New Regime (FY 2026-27)

A full rebate of up to ₹60,000 is available under Section 87A of the Income-tax Act, 2025 if your total taxable income does not exceed ₹12,00,000. This means that even though tax is calculated on income in the 5%, 10% slabs, the rebate reduces total tax liability to nil.

Note: The 87A rebate is applied before cess but after calculating the slab-rate tax. Special rate incomes (e.g., short-term capital gains under Section 111A, long-term capital gains) are taxed separately and the rebate does not reduce tax on those incomes.

Standard Deduction Under New Regime

Salaried individuals and pensioners are entitled to a standard deduction of ₹75,000 under the new tax regime. This deduction was introduced to compensate for the disallowance of transport allowance, medical reimbursement, and other employment allowances. It is automatically applied — no investment proof required.

Deductions & Exemptions NOT Available Under Section 115BAC

Deductions Still Available Under Section 115BAC

• Standard deduction — ₹75,000 for salaried and pensioners
• Section 80CCD(2) — Employer's contribution to NPS (up to 10% of basic + DA for private employees; 14% for government employees)
• Section 80CCH — Contribution to Agniveer Corpus Fund
• Section 10(10D) — Life insurance maturity proceeds (conditions apply)
• Section 10(12) — EPF withdrawals (after 5 years of service)
• Gratuity — Section 10(10) exemption for gratuity received on retirement
• Leave encashment — Section 10(10AA) on retirement
• Interest on home loan for let-out property — Section 24(b) is allowed for let-out property

Surcharge Cap Under New Regime

One significant benefit of the new tax regime is the cap on surcharge at 25% for all income levels (including income above ₹5 crore). Under the old regime, surcharge can go up to 37% for very high incomes, resulting in a marginal rate of up to 42.74%. Under the new regime, the maximum marginal rate is capped at 39% (30% + 25% surcharge + 4% cess).

Opting Back to the Old Tax Regime

Since FY 2023-24, the new regime is the default. To use the old regime:

• Salaried individuals: Can choose old regime every year when filing ITR (by submitting Form 10-IEA or selecting the option in ITR). Employer TDS can be adjusted based on your declaration at the start of the year.
• Business/professional income: Must file Form 10-IEA before the due date of ITR filing. Once switched back from new to old, the old regime becomes locked for subsequent years (cannot switch to new regime again, with limited exceptions).

Frequently Asked Questions — Section 115BAC

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