Income Tax Slabs in India: Tax Year 2026-27 Guide

The new regime is the optional tax regime under Section 115BAC of the Income-tax Act, 1961. It offers lower slab rates, with fewer deductions and exemptions allowed in return. For salaried individuals, the standard deduction is available under the new regime as per later amendments.

This is important to note for salary earners, as the income tax on salary often changes when allowances, reimbursements, and deductions are removed or reduced under the new regime.
 

Here are the new tax slabs that the new regime taxpayers should know of:

Disclaimer: Note that tax benefits/rules are subject to terms and conditions as well as changes in tax laws. 

The old tax regime allows taxpayers to use deductions and exemptions (e.g., HRA, home loan interest, medical insurance) to reduce their taxable income. The slab rates are higher than the new regime, but those tax breaks can cut your tax bill. If you have many eligible investments or expenses, the old regime may be more beneficial despite higher base rates. 

If you opt for the old regime, these are the tax slabs in India you should know of:

Disclaimer: Note that tax benefits/rules are subject to terms and conditions as well as changes in tax laws. 

The latest income tax slabs vary depending on the chosen regime and the taxpayer's age. While the new regime offers a uniform structure for all, the old regime maintains specific exemptions based on residency and age.

For tax year 2026-27, the new tax regime remains the default choice, featuring a simplified structure that does not distinguish between age groups. However, the old regime continues to offer tiered relief to senior and super-senior citizens.

Understanding these income tax slabs helps you select the most tax-efficient path based on your life and investment situation.

Income Tax Slabs for Individuals

For individuals below 60 years choosing the old tax regime slabs, the basic exemption is ₹2.5 lakh. Above this, income tax slab rates of 5%, 20%, and 30% apply as income increases. Specifically, the 5% rate applies to income between ₹2.5 lakh and ₹5 lakh, while the 20% rate applies to income between ₹5 lakh and ₹10 lakh. 
Any income exceeding ₹10 lakh is taxed at the maximum marginal rate of 30%. Under the new tax regime slabs, this same individual would benefit from a much higher basic exemption limit of ₹4 lakh, with lower intermediate rates.

Income Tax Slabs for Senior Citizens

In the old regime, income tax slabs for senior citizens (ages 60 to 80) provide a higher exemption of ₹3 lakh. For super senior citizens aged 80 and above, the limit is ₹5 lakh. This targeted relief under the old system is designed to provide retirees with higher disposable income who may not have had active salary increases. 

It is important to note that the new tax regime slabs do not offer these age-based hikes in the exemption limit; instead, they apply a flat ₹4 lakh limit for everyone, which is often offset by the significant Section 87A rebate that makes income up to ₹12 lakh tax-free.

Surcharge is an additional tax levied on high-income earners. It is calculated on the tax amount, not the income itself. The rates are designed to ensure that those with higher fiscal capacity contribute more to the national tax collection. 

While slab rates focus on base income, the surcharge serves as a progressive tool to increase the total tax liability of the ultra-wealthy. Additionally, a 4% health and education cess is applied to the sum of the income tax and the surcharge as per the current income tax cess rates.

Applicable Surcharge Thresholds in 2026

The thresholds are ₹50 lakh, ₹1 crore, ₹2 crore, and ₹5 crore. The highest surcharge rate under the new tax regime slabs is 25%, providing relief to ultra-high-net-worth individuals, compared to the old tax regime, where surcharge can go up to 37%.

For those whose income just marginally crosses these thresholds, a mechanism called marginal relief is available. 

Marginal relief ensures that the increase in tax (including the surcharge) does not exceed the actual increase in income beyond the threshold, preventing a situation where a small raise results in lower take-home pay.
 

Choosing between the new tax regime slabs and the old tax regime slabs depends on your total deductions. If your HRA and eligible exemptions are high, the old regime might be better. Otherwise, the lower income tax slab rates of the new regime are generally preferable.

Historical data is useful for filing belated returns or understanding trends. The latest income tax slabs have seen a steady increase in the basic exemption limit over the last few years to support middle-class taxpayers.

Income Tax Slabs FY 2024-25

In the previous year, the new tax regime slabs featured a ₹3 lakh base exemption. The shift to a ₹4 lakh base in tax year 2026-27 represents a significant step toward further tax reduction.
 

A practical method is to first compute taxable income, then apply the slab rates, then apply any eligible rebates, and finally add the cess. Here’s a step-by-step guide: 

• Start with gross salary and add taxable allowances.
• Subtract exemptions that remain available (as applicable under the chosen regime).
• Subtract allowed deductions (standard deduction and any permitted deductions under the chosen regime).
• Arrive at total taxable income and apply slab rates.
• Apply for a rebate under Section 87A if eligible under your chosen tax slabs in India.
• Add a 4% cess to the tax payable.

Along with income tax slabs, the availability of rates and deductions also differ between the two regimes. That is why the final selection should follow the computed amount, not only the slab chart.

After checking the taxable income table, the rebate rule must be applied. Under Section 87A[PB1.1], a rebate may make tax payable zero up to a threshold (commonly ₹5 lakh in the old regime and ₹12.75 lakh in the new regime, subject to conditions). Cess is added after the rebate.
 

Under the old regime, common deductions may include:

• Section 80C items (PF, ELSS, life insurance premiums, tuition fees)
• Section 80D medical insurance premium
• HRA exemption (where eligible)
• Home loan interest (subject to rules).

Under the new tax regime in 2026, most of the above are not claimed, but certain items remain permitted or continue to be exempt. Examples include:

• Standard deduction for salaried persons (as per current provisions)
• Employer contribution to NPS under Section 80CCD(2) (subject to limits)
• Certain allowances for specific categories as per the rules
• Exemptions like gratuity or leave encashment, where conditions are met[PB. 
   

Tax saving under the new tax regime slabs is more about salary design and permitted deductions than long lists of investments. The following options stay relevant in many cases:

• Use the standard deduction fully, where salaried income exists.
• Consider employer NPS contribution under Section 80CCD(2), since it’s a major permitted deduction under the new regime.
• Review salary components that are structured as exemptions under law (where allowed), rather than deductions.
• Maintain clear proofs and payroll declarations to prevent mismatches at year-end.

The Income Tax Act, 2025, is set to replace the existing Income Tax Act, 1961, with effect from 1 April 2026. The new framework aims to modernise and streamline India’s direct tax system while retaining its core principles.

One of the key changes introduced under the new law is its simplified structure, with provisions reorganised into 23 concise chapters, making it easier for taxpayers to navigate and understand.

Below is a comparison of commonly used deductions and their corresponding sections under the old and new Acts:

The old regime often suits those who have strong deductions and exemptions, while the new tax regime slabs often suit those with fewer investments and a preference for the revised income tax slab rates under Section 115BAC. The decision should be based on two computations done side by side, using the same income details.

For accurate filing, one can refer to the Income-tax Act, 1961 (notably Section 115BAC, Section 87A, and Section 80CCD(2)), the Income-tax Act, 2025, and the relevant Finance Act for Tax Year 2026-27. 

Note: Tax benefits rules are subject to terms and conditions as well as changes in tax laws. Taxpayers are advised to consult a licensed financial expert before proceeding with financial decisions.
 

1. Is income up to 12 lakh tax-free under the new tax regime? 

Yes, including the standard deduction and Section 87A tax rebate.

2. What is the difference between the old and new tax regimes? 

The new regime offers lower rates without common tax deductions.

3. What is the surcharge on income tax in India?

An additional tax on individuals earning above ₹50 lakh.

4. How is income tax calculated for salaried employees? 

Apply slab rates to net income after subtracting permitted deductions.

5. What is the standard deduction in income tax? 

A flat ₹75,000 deduction for salaried taxpayers and pensioners.

6. Can I switch between old and new tax regimes every year? 

Salaried individuals can switch annually; business owners have restricted options.

7. Do senior citizens have different tax slabs in India? 

Only under the old regime; the new regime is uniform.

8. How does Section 87A rebate work? 

It reduces tax liability to zero for specific taxable income limits.

9. Is health and education cess applicable on all taxpayers? 

Yes, a 4% cess applies to the total tax.