Income Tax Slabs AY 2026-27 (FY 2025-26): New vs Old Tax Regime Explained with Examples
Income tax slabs determine how much tax you pay based on your total taxable income. For Assessment Year 2026-27, taxpayers can choose between the New Tax Regime and the Old Tax Regime. The new regime offers simplified taxation with lower rates, while the old regime allows deductions and exemptions.
Understanding both regimes is important before filing your Income Tax Return, as choosing the right one can significantly reduce your tax liability.
In this guide, we explain:
- Latest income tax slabs AY 2026-27
- New vs old tax regime comparison
- Rebate under Section 87A
- Standard deduction rules
- Tax calculation examples
- Which regime is better
- FAQs
What are Income Tax Slabs?
Income tax slabs are income ranges that determine how much tax an individual must pay. India follows a progressive tax system, meaning higher income is taxed at higher rates.
For AY 2026-27:
- Two tax regimes available
- New regime is default
- Old regime optional
- Taxpayer can choose beneficial regime
New Tax Regime Slabs AY 2026-27
The new tax regime provides lower tax rates with limited deductions.
| Income Range | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Key Benefits of New Tax Regime
- Basic exemption limit ₹4 lakh
- Lower tax rates
- Standard deduction ₹75,000
- Rebate up to ₹60,000
- Income up to ₹12 lakh tax free
- Simple tax calculation
- Default tax regime
Old Tax Regime Slabs AY 2026-27
The old regime allows deductions and exemptions.
| Income Range | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Benefits of Old Tax Regime
- Section 80C deduction
- HRA exemption
- LTA exemption
- Home loan deduction
- Insurance deduction
- NPS deduction
- 80G donation deduction
Standard Deduction AY 2026-27
- New regime: ₹75,000
- Old regime: ₹50,000
Standard deduction is available for:
- Salaried employees
- Pensioners
Section 87A Rebate – Zero Tax up to ₹12 Lakh
Under new regime:
Tax rebate available = ₹60,000
This means income up to ₹12 lakh becomes tax free.
Example:
Income = ₹12,00,000
Standard deduction = ₹75,000
Taxable income = ₹11,25,000
Tax = ₹52,500
Rebate = ₹52,500
Final tax = Nil
Example 1 – Salary ₹10,00,000
Income = ₹10,00,000
Standard deduction = ₹75,000
Taxable income = ₹9,25,000
Tax:
- 0 – 4 lakh = Nil
- 4 lakh @5% = 20,000
- 1.25 lakh @10% = 12,500
Total = 32,500
Rebate = 32,500
Tax payable = Zero
Example 2 – Salary ₹15,00,000
Income = ₹15,00,000
Standard deduction = ₹75,000
Taxable income = ₹14,25,000
Tax:
- 0 – 4 lakh = Nil
- 4 lakh @5% = 20,000
- 4 lakh @10% = 40,000
- 2.25 lakh @15% = 33,750
Total = 93,750
Cess 4% = 3,750
Total tax = ₹97,500
Example 3 – Salary ₹25,00,000
Taxable income after deduction = ₹24,25,000
Tax:
- 0 – 4 lakh = Nil
- 4 lakh @5% = 20,000
- 4 lakh @10% = 40,000
- 4 lakh @15% = 60,000
- 4 lakh @20% = 80,000
- 4 lakh @25% = 1,00,000
- 25,000 @30% = 7,500
Total = 3,07,500
Cess = 12,300
Total tax = ₹3,19,800
New vs Old Tax Regime Comparison
| Feature | New Regime | Old Regime |
|---|---|---|
| Tax Rates | Lower | Higher |
| Deductions | Limited | Many |
| Standard Deduction | 75,000 | 50,000 |
| 80C | Not allowed | Allowed |
| HRA | Not allowed | Allowed |
| Home Loan | Limited | Allowed |
| Rebate | ₹12 lakh | ₹5 lakh |
| Default | Yes | No |
Which Tax Regime is Better?
Choose New Regime if:
- No investments
- No deductions
- No home loan
- Salary below ₹24 lakh
- Want simple tax
Choose Old Regime if:
- Claiming 80C
- Home loan interest
- High HRA
- Insurance deduction
- Large deductions
Marginal Relief Under New Regime
Marginal relief ensures tax does not increase sharply if income crosses ₹12 lakh.
Example:
Income = ₹12,10,000
Tax without relief = 61,500
Marginal relief reduces tax
Final tax ≈ 10,000
Surcharge & Cess
4% health and education cess applies to all taxpayers.
Surcharge:
| Income | Surcharge |
|---|---|
| ₹50 lakh – ₹1 crore | 10% |
| ₹1 crore – ₹2 crore | 15% |
| ₹2 crore – ₹5 crore | 25% |
| Above ₹5 crore | 25% / 37% |
Step-by-Step Tax Calculation
- Step 1 Calculate total income
- Step 2 Reduce deductions
- Step 3 Compute taxable income
- Step 4 Apply slab rates
- Step 5 Apply rebate
- Step 6 Add cess
- Step 7 Adjust TDS
Income Level Comparison
| Salary | New Regime Tax | Old Regime Tax |
|---|---|---|
| ₹8 lakh | Nil | Higher |
| ₹10 lakh | Nil | Higher |
| ₹12 lakh | Nil | Higher |
| ₹15 lakh | Lower | Higher |
| ₹20 lakh | Much lower | Higher |
| ₹25 lakh | Lower | Higher |
Who Should Choose New Regime
- Salaried employees
- No deductions
- Freelancers
- Consultants
- Young taxpayers
Who Should Choose Old Regime
- Home loan holders
- High investments
- High HRA
- Insurance payments
- NPS contributors
Conclusion
The updated income tax slabs for AY 2026-27 make the new tax regime more beneficial for most taxpayers. With a basic exemption limit of ₹4 lakh and rebate up to ₹12 lakh, many individuals will pay zero tax. However, taxpayers with large deductions should compare both regimes before filing returns.
Frequently Asked Questions
Is income up to ₹12 lakh tax free?
Yes, under new regime after rebate.
What is standard deduction in new regime?
₹75,000
What is basic exemption limit?
₹4 lakh
Which regime is default?
New tax regime
Can I switch every year?
Yes for salaried taxpayers
Is 80C allowed in new regime?
No
Is HRA allowed in new regime?
No
Which regime better for salary?
Depends on deductions
What is rebate under 87A?
₹60,000 rebate
Is ₹10 lakh tax free?
Yes under new regime
Last date for ITR AY 2026-27?
31 July 2026
Do senior citizens get benefit?
Only in old regime
Can NRIs choose new regime?
Yes
Is new regime better?
For most taxpayers yes