1. Quick Summary & Tax-Free Threshold (AY 2026-27)
For Assessment Year 2026-27 (income earned in FY 2025-26), India's statutory tax slabs continue under the Finance Act provisions, while the new Income Tax Act, 2025 takes effect from 1 April 2026. Under the default New Tax Regime (Section 115BAC), resident salaried individuals with gross annual earnings up to ₹12,75,000 pay ₹0 tax (₹12 Lakh taxable income limit + ₹75,000 standard deduction).
- New Regime Standard Deduction: ₹75,000 for salaried employees and pensioners.
- Section 87A Rebate: Up to ₹60,000 rebate if net taxable income is ≤ ₹12,00,000 (100% tax waiver).
- Old Regime Exemption: ₹2,50,000 (General), ₹3,00,000 (Senior 60–80), ₹5,00,000 (Super Senior 80+) with ₹50,000 standard deduction and Section 80C/80D/HRA deductions.
2. Official New Tax Regime Slabs (Section 115BAC — AY 2026-27)
The New Tax Regime is the default tax regime for all taxpayers unless explicitly opted out via Form 10-IEA. It features 7 simplified progressive tax brackets:
| Slab Tier | Taxable Income Range (₹) | Marginal Tax Rate | Maximum Tax in Bracket |
|---|---|---|---|
| 1 | Up to ₹4,00,000 | Nil (0%) | ₹0 |
| 2 | ₹4,00,001 to ₹8,00,000 | 5% | ₹20,000 |
| 3 | ₹8,00,001 to ₹12,00,000 | 10% | ₹40,000 |
| 4 | ₹12,00,001 to ₹16,00,000 | 15% | ₹60,000 |
| 5 | ₹16,00,001 to ₹20,00,000 | 20% | ₹80,000 |
| 6 | ₹20,00,001 to ₹24,00,000 | 25% | ₹1,00,000 |
| 7 | Above ₹24,00,000 | 30% | 30% on excess |
Rebate under Section 87A: If your taxable income is ₹12,00,000 or below, you receive a full tax rebate up to ₹60,000, bringing your net tax liability to ₹0.
Cess: 4% Health & Education Cess is added to the aggregate income tax liability.
3. Old Tax Regime Slabs & Permitted Deductions
Under the Old Tax Regime, tax brackets vary based on the age of the resident individual:
| Taxable Income Range (₹) | Below 60 Years | Senior (60–80 Yrs) | Super Senior (80+ Yrs) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001 to ₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001 to ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Flat ₹50,000 deduction from gross salary income (compared to ₹75,000 under the New Regime).
Deductions up to ₹1,50,000 for EPF, PPF, ELSS mutual funds, LIC premiums, and principal home loan repayments.
Up to ₹25,000 (self/family) + ₹50,000 (senior citizen parents) for medical insurance premiums.
Exemption under Section 10(13A) for house rent paid and up to ₹2,00,000 under Section 24(b) for self-occupied home loan interest.
4. Worked Numerical Examples (Salaried Taxpayers)
Here is how tax is calculated across three representative income tiers under both the Old and New Tax Regimes:
Gross Salary: ₹12,00,000
Less Standard Deduction: -₹75,000
Taxable Income: ₹11,25,000
Tax before rebate: ₹20,000 (4–8L) + ₹32,500 (8–11.25L) = ₹52,500
Section 87A Rebate: -₹52,500 (Taxable ≤ ₹12L)
Net Tax Payable: ₹0.00
Gross Salary: ₹12,00,000
Less Standard Deduction: -₹50,000
Less Section 80C: -₹1,50,000
Taxable Income: ₹10,00,000
Tax: ₹12,500 (2.5–5L) + ₹1,00,000 (5–10L) = ₹1,12,500
Add 4% Cess: +₹4,500
Net Tax Payable: ₹1,17,000
Verdict: The New Regime saves ₹1,17,000 in income tax at the ₹12 Lakh salary level.
Taxable Income: ₹14,25,000 (after ₹75k SD)
Tax 4–8L @5%: ₹20,000
Tax 8–12L @10%: ₹40,000
Tax 12–14.25L @15%: ₹33,750
Base Tax: ₹93,750
4% Cess: +₹3,750
Total Tax: ₹97,500
Taxable Income: ₹13,00,000 (after SD + 80C)
Tax 2.5–5L @5%: ₹12,500
Tax 5–10L @20%: ₹1,00,000
Tax 10–13L @30%: ₹90,000
Base Tax: ₹2,02,500
4% Cess: +₹8,100
Total Tax: ₹2,10,600
Without 80C deductions, Old Regime tax is ₹2,57,400. New Regime provides a net direct saving of ₹1,13,100 to ₹1,59,900.
Taxable Income Base: ₹24,25,000 (Gross ₹25,00,000 − ₹75,000 Standard Deduction)
• ₹4L–₹8L (5%): ₹20,000
• ₹8L–₹12L (10%): ₹40,000
• ₹12L–₹16L (15%): ₹60,000
• ₹16L–₹20L (20%): ₹80,000
• ₹20L–₹24L (25%): ₹1,00,000
• ₹24L–₹24.25L (30% on ₹25k excess): ₹7,500
Total Slab Tax: ₹3,07,500 | 4% Health & Education Cess: ₹12,300
Final Income Tax Liability: ₹3,19,800
5. Which Regime Wins? Quick Decision Breakdown
- Your gross salary is up to ₹12.75 Lakh (pay ₹0 tax).
- You do not pay high house rent (no large HRA exemption).
- You do not have a home loan with heavy interest deductions.
- You prefer zero paperwork, no lock-in ELSS investments, and simpler tax filing.
- You claim multiple combined deductions exceeding ₹3.75–4.25 Lakh (₹1.5L 80C + ₹2L Home Loan + ₹50k 80D + HRA).
- You have substantial metro-city rent payments eligible for HRA relief.
- You have business income with substantial Section 35/80 deductions.
Compare Your Exact Tax Under Both Regimes
Calculate your exact take-home salary, HRA exemptions, and optimal return form using our free Indian tax tools: