Income Tax Slabs FY 2026-27: New vs Old Regime Explained with Examples

Income tax slabs decide how much of each extra rupee you keep, but the rebate and deductions around them decide what you actually pay. This guide sets out the slabs that apply to income earned in FY 2026-27 (1 April 2026 to 31 March 2027), shows how the ₹12 lakh rebate works, and uses worked examples to show when each regime wins. The slab structure was last reset in Budget 2025 and applies unchanged for this year.

New tax regime slabs (the default)

The new regime under section 115BAC is the default. You can opt out and choose the old regime when you file (salaried individuals decide every year; business owners have stricter switching rules).

A standard deduction of ₹75,000 applies to salary and pension income. Most other deductions (80C, 80D, HRA, home-loan interest on a self-occupied house) are not available, with two notable exceptions: the employer's contribution to NPS under section 80CCD(2) (up to 14% of basic salary plus DA) and the family pension deduction. Add 4% health and education cess on the tax.

The ₹12 lakh rebate

Under section 87A, residents with taxable income up to ₹12,00,000 in the new regime get a rebate of up to ₹60,000, so the tax is zero. For a salaried person, add the standard deduction: gross salary up to ₹12,75,000 means zero tax. The rebate does not apply to special-rate income such as capital gains taxed at 12.5% or 20%.

Just above the limit, marginal relief keeps your tax from exceeding the income above ₹12 lakh. At a taxable income of ₹12,25,000, slab tax would be ₹63,750, but with marginal relief you pay only ₹25,000 (plus cess). Without this, a ₹25,000 increase in income would trigger a ₹63,750 jump in tax.

Old tax regime slabs

The old regime keeps its deductions (80C up to ₹1.5 lakh, 80D, HRA, 24(b) home-loan interest up to ₹2 lakh, NPS under 80CCD(1B) up to ₹50,000 and more), a ₹50,000 standard deduction, and a rebate that makes tax nil only up to a taxable income of ₹5 lakh.

Surcharge on high incomes

Surcharge is added to the tax when total income crosses ₹50 lakh: 10% above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore, and 37% above ₹5 crore in the old regime. In the new regime the top surcharge is capped at 25%. Surcharge on dividends and most capital gains is capped at 15%.

Worked examples: what a salaried person pays

These figures assume salary only, new regime with the ₹75,000 standard deduction, and for the old regime ₹1.5 lakh under 80C, a ₹25,000 health-insurance deduction and the ₹50,000 standard deduction. Both include 4% cess.

At ₹15 lakh gross, the new regime tax is ₹97,500. To get the same tax in the old regime you would need about ₹5.6 lakh of total deductions (including the ₹50,000 standard deduction). That is why most salaried people with ordinary deductions are better off in the new regime. The old regime wins when you have a large HRA exemption plus home-loan interest plus 80C and NPS.

How to choose between the regimes

1. List the deductions you can really claim (HRA, home-loan interest, 80C, 80D, NPS).
2. Add the ₹50,000 standard deduction and compute old-regime tax on the reduced income.
3. Compute new-regime tax after the ₹75,000 standard deduction.
4. Pick the lower figure. Our income tax calculator and slab comparison tool do this in seconds.

Common mistakes

• Forgetting to opt out. The new regime is the default for the TDS your employer deducts; if the old one suits you, tell your employer at the start of the year and choose it again when filing.
• Assuming the rebate covers capital gains. It does not cover special-rate income.
• Ignoring employer NPS. It is one of the few strong deductions that works in the new regime.
• Counting only salary. Interest, rent and other income are added before slabs apply.

Note that the Income-tax Act, 2025 takes effect from 1 April 2026 and renumbers sections and uses the term "tax year". The rates above are unchanged, but forms and section numbers may look different on the portal.

Frequently asked questions

What are the income tax slabs for FY 2026-27?

In the new regime: nil up to ₹4 lakh, 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh and 30% above. A rebate makes income up to ₹12 lakh tax-free.

Is income up to ₹12 lakh really tax-free?

Yes in the new regime for taxable income up to ₹12 lakh, thanks to the section 87A rebate. For salaried people, gross salary up to ₹12.75 lakh after the ₹75,000 standard deduction.

Which regime is better for me?

Usually the new regime unless your total deductions are very large. At ₹15 lakh income you need roughly ₹5.6 lakh of deductions for the old regime to win.

Does the rebate apply to capital gains?

No, not to special-rate income such as long-term gains taxed at 12.5%.

Can I switch between regimes?

Salaried individuals can choose each year when filing. Taxpayers with business income can switch back only once.

What is the standard deduction?

₹75,000 in the new regime and ₹50,000 in the old regime for salary and pension income.

Last reviewed 8 November 2026. Rates, limits and rules change, so confirm figures with the official source before you act.