As India enters FY 2026-27, millions of taxpayers face a critical question: how much income tax will I pay this year? Whether you're a salaried professional earning ₹8 lakh or a business owner with ₹25 lakh income, understanding the latest income tax slab rates for FY 2026-27 (Assessment Year 2027-28) is essential for accurate tax planning. With the new tax regime now the default option and Section 87A rebate making income up to ₹12 lakh tax-free, choosing the right regime can save you thousands of rupees annually.
This comprehensive guide covers the complete income tax slab structure for FY 2026-27 under both new and old tax regimes, eligibility for rebates, surcharge rates, and real-life calculation examples to help you optimize your tax liability.
- Budget 2026 retained existing tax slab rates - no changes announced for FY 2026-27 (AY 2027-28)
- New tax regime offers zero tax on income up to ₹12 lakh with Section 87A rebate; salaried individuals pay no tax up to ₹12.75 lakh gross income
- Old regime basic exemption remains ₹2.5 lakh but allows 70+ deductions including Section 80C, HRA, and home loan interest
- Finance Act 2026 and Income Tax Act 2025 came into effect from 1 April 2026 with renumbered sections but same tax rates
Income Tax Slab Rates for FY 2026-27: What Changed (and What Didn't)
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman on 1 February 2026, did not change the income tax slab rates under either the new or old regime. The slab structure announced in Budget 2025 continues through FY 2026-27 (Assessment Year 2027-28). This continuity provides stability for taxpayers planning their investments and deductions for the current financial year.
The Finance Act, 2026 was officially notified after receiving Presidential assent on 30 March 2026, giving effect to the Union Government's financial proposals for FY 2026-27 and introducing important updates to income tax rates, surcharge structures, and compliance provisions. Most provisions of the Act came into force from 1 April 2026, marking the beginning of the new assessment year and tax regime implementation.
Key Structural Changes from 1 April 2026
Three structural items changed with effect from 1 April 2026: The Income Tax Act, 2025 has replaced the Income Tax Act, 1961. A major change is the concept of the 'Tax Year,' defined as the twelve-month period of the financial year commencing on 1 April, replacing the earlier terms 'Assessment Year' and 'Previous Year'. However, this is largely a terminology and structural update - the actual tax rates, slabs, and computation methods remain unchanged.
New Tax Regime Slab Rates for FY 2026-27 (AY 2027-28)
The income tax slabs under the new regime for FY 2026-27 (AY 2027-28) are: Up to ₹4 lakh - NIL; ₹4 lakh - ₹8 lakh - 5%; ₹8 lakh - ₹12 lakh - 10%; ₹12 lakh - ₹16 lakh - 15%; ₹16 lakh - ₹20 lakh - 20%; ₹20 lakh - ₹24 lakh - 25%; Above ₹24 lakh - 30%. This 7-slab progressive structure introduced in Budget 2025 continues for the current year under Section 115BAC of the Income Tax Act.
Under the new tax regime for FY 2026-27, the basic exemption limit is ₹4 lakh, and the tax rebate under Section 87A is ₹60,000 for taxable income up to ₹12 lakh. This means individuals with taxable income up to ₹12 lakh will pay no income tax, effectively making this segment of income completely tax-free.
Standard Deduction Under New Tax Regime
For salaried taxpayers, after factoring in the standard deduction of ₹75,000, the tax-free income ceiling may extend up to ₹12.75 lakh. This makes the new regime highly attractive for salaried professionals and pensioners earning within this range. You can calculate your exact tax liability using our Income Tax Calculator by entering your salary and deduction details.
New Tax Regime: Who Benefits Most?
For FY 2026-27, the new regime benefits the majority of salaried Indians earning under ₹18 lakh - Section 87A rebate zeros out tax on income up to ₹12.75 lakh (gross, including the ₹75,000 standard deduction). The old regime wins only if your combined deductions (80C + NPS + HRA + home loan interest under Section 24(b)) exceed roughly ₹4 lakh; below that break-even, take the new regime.
Old Tax Regime Slab Rates for FY 2026-27 (AY 2027-28)
The income tax slabs under the old regime remained unchanged for FY 2026-27 (AY 2027-28). The old regime continues to offer higher basic exemption limits for senior and super senior citizens along with access to 70+ exemptions and deductions.
Under the old tax regime for individuals below 60 years:
- Up to ₹2.5 lakh: Nil
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
For senior citizens (60-80 years), the basic exemption limit is ₹3 lakh, and for super senior citizens (above 80 years), it is ₹5 lakh. Unlike the new tax regime, the old tax regime allows various deductions and exemptions (e.g., Section 80C investments, HRA, LTA, standard deduction, home loan interest, etc.).
Popular Deductions Under Old Regime
The old regime permits deductions under:
- Section 80C: Up to ₹1.5 lakh for PPF, ELSS, life insurance premiums, tuition fees, etc.
- Section 80D: Health insurance premium deductions up to ₹25,000 (₹50,000 for senior citizens)
- Section 80CCD(1B): Additional ₹50,000 for NPS contributions
- Section 24(b): Up to ₹2 lakh for home loan interest on self-occupied property
- HRA Exemption: For salaried individuals paying rent (calculate using our HRA Calculator)
- Standard Deduction: ₹75,000 for salaried employees and pensioners
Section 87A Rebate for FY 2026-27: Complete Details
Under Budget 2026, the rebate structure remains unchanged for FY 2026-27; if your income is up to ₹12 lakh, then you can get a maximum rebate of ₹60,000, meaning you must pay zero income taxes. This is one of the most significant tax benefits introduced in recent years for middle-income taxpayers.
Eligibility Criteria for Section 87A Rebate
To claim the rebate under Section 87A for AY 2027-28, you must be a resident individual of India as per Section 6 of the Income Tax Act, and your total taxable income (after all eligible deductions) must not exceed ₹5,00,000 (old regime) or ₹12,00,000 (new regime). The rebate applies only to individuals - HUFs, firms, LLPs, and companies cannot claim it.
Only resident individuals can get the Section 87A rebate; if you are residing in India and your income is within the specified limit, you will get this benefit. Some, like NRIs, HUFs, companies or firms, and super senior citizens (above 80 years of age), are not eligible.
How Section 87A Rebate Works
You do not need to apply separately to claim the 87A rebate; the rebate is automatically computed and applied when you file your ITR for AY 2027-28, provided your taxable income falls within the eligible limit for your chosen regime. Before filing, verify your tax credits and TDS deductions using our Form 26AS / TDS Fetch Tool to ensure accurate rebate calculation.
Under the new tax regime, the 87A rebate generally cannot be claimed against tax on income taxed at special rates, such as short-term capital gains on listed equity shares/equity mutual funds under Section 111A. This is an important distinction many taxpayers miss when computing their final tax liability on investment income.
Income Tax Slab Comparison: New vs Old Regime for FY 2026-27
| Income Range | New Regime Tax Rate | Old Regime Tax Rate (Below 60 years) |
|---|---|---|
| Up to ₹2.5 lakh | Nil | Nil |
| ₹2.5L - ₹4L | Nil | 5% |
| ₹4L - ₹5L | 5% | 5% |
| ₹5L - ₹8L | 5% | 20% |
| ₹8L - ₹10L | 10% | 20% |
| ₹10L - ₹12L | 10% | 30% |
| ₹12L - ₹16L | 15% | 30% |
| ₹16L - ₹20L | 20% | 30% |
| ₹20L - ₹24L | 25% | 30% |
| Above ₹24L | 30% | 30% |
Note: Health and Education Cess of 4% applies on total tax under both regimes. Surcharge applies at specified income thresholds.
Surcharge and Cess for FY 2026-27
Surcharge and Health and Education Cess remain at existing rates. Surcharge on income tax is applicable to taxpayers who have annual income of ₹50 lakh or higher.
For individuals, HUFs, AOPs, BOIs under the new tax regime:
- Income ₹50 lakh - ₹1 crore: 10% surcharge
- Income ₹1 crore - ₹2 crore: 15% surcharge
- Income ₹2 crore - ₹5 crore: 25% surcharge
- Income above ₹5 crore: 25% surcharge
The maximum surcharge rate is 25% for taxpayers having income above ₹5 crores under new tax regime, while in old regime it is 37%. This makes the new regime significantly more beneficial for ultra-high-net-worth individuals. All taxpayers must also pay Health and Education Cess at 4% on the total tax amount (including surcharge).
Real-Life Tax Calculation Examples for FY 2026-27
Example 1: Salaried Individual with ₹10 Lakh Income (New Regime)
Gross Salary: ₹10,00,000
Less: Standard Deduction: ₹75,000
Taxable Income: ₹9,25,000
Tax Calculation:
- Up to ₹4 lakh: Nil
- ₹4-8 lakh (₹4 lakh): ₹4,00,000 × 5% = ₹20,000
- ₹8-9.25 lakh (₹1.25 lakh): ₹1,25,000 × 10% = ₹12,500
- Total Tax: ₹32,500
- Less: Section 87A Rebate: ₹32,500 (since taxable income < ₹12 lakh)
- Tax Payable: ₹0
This individual pays zero tax under the new regime!
Example 2: Salaried Individual with ₹15 Lakh Income (Comparing Regimes)
Gross Salary: ₹15,00,000
Standard Deduction: ₹75,000
Section 80C Investments: ₹1,50,000
Home Loan Interest (Section 24b): ₹2,00,000
Health Insurance (Section 80D): ₹25,000
New Regime Calculation:
- Taxable Income: ₹15,00,000 - ₹75,000 = ₹14,25,000
- Tax: ₹0 (up to ₹4L) + ₹20,000 (₹4-8L) + ₹40,000 (₹8-12L) + ₹60,000 (₹12-14.25L) = ₹1,20,000
- Add: Health & Education Cess (4%): ₹4,800
- Total Tax: ₹1,24,800
Old Regime Calculation:
- Taxable Income: ₹15,00,000 - ₹75,000 - ₹1,50,000 - ₹2,00,000 - ₹25,000 = ₹10,50,000
- Tax: ₹0 (up to ₹2.5L) + ₹12,500 (₹2.5-5L) + ₹1,00,000 (₹5-10L) + ₹15,000 (₹10-10.5L) = ₹1,27,500
- Add: Health & Education Cess (4%): ₹5,100
- Total Tax: ₹1,32,600
In this case, the new regime saves ₹7,800 even with substantial deductions available under the old regime. Use our Income Tax Calculator to run similar comparisons for your specific income and deduction profile.
Example 3: Business Income with Capital Gains
Business Income: ₹8,00,000
Short-Term Capital Gains (equity): ₹1,50,000
Long-Term Capital Gains (equity): ₹2,00,000
Under the new regime, your business income of ₹8 lakh (after standard deduction of ₹75,000 = ₹7,25,000 taxable) would attract minimal tax. However, STCG is taxed at 15% under Section 111A and LTCG above ₹1 lakh at 10% under Section 112A - these are taxed at special rates and Section 87A rebate does not apply to them. Calculate your capital gains tax accurately using our Capital Gain Calculator.
How to Choose Between Old and New Tax Regime for FY 2026-27
The new regime generally benefits taxpayers with fewer deductions, while the old regime remains advantageous for those claiming substantial HRA, home loan interest, Section 80C, and Section 80D deductions.
Choose the New Tax Regime If:
- Your gross income is below ₹12.75 lakh (salaried) - you'll pay zero tax
- You don't claim significant deductions (less than ₹3-4 lakh annually)
- You prefer simplicity and don't want to track multiple investments for tax saving
- You invest in equity and stocks (track profits with our Stock Profit Calculator)
Choose the Old Tax Regime If:
- You claim HRA exemption exceeding ₹2 lakh annually
- You have a home loan with interest above ₹1.5 lakh per year
- You regularly max out Section 80C (₹1.5L), 80D (₹25-50K), and NPS 80CCD(1B) (₹50K)
- Your total annual deductions exceed ₹4 lakh
Taxpayers should compare their tax liability under both regimes before filing their return to determine which option is more beneficial based on their income level, investments, and eligible deductions.
Important Changes in Income Tax Compliance for FY 2026-27
Revised income tax return can now be filed up to 31 March instead of the earlier 31 December deadline, but a fee will be charged. A fee of ₹5,000 applies if total income exceeds ₹5 lakh, and ₹1,000 if total income is below ₹5 lakh.
For non-audit taxpayers except those who file ITR 1 and ITR 2, the due date for filing ITR is extended to 31 August. This provides additional time for salaried individuals and professionals to gather documentation and file accurate returns. Analyze your bank statements efficiently using our Bank Statement Analyser before filing.
Key Compliance Points
- New regime is the default - you must actively opt for old regime by filing Form 10-IEA
- Salaried individuals can switch between regimes every year
- Business/professional income earners can switch only once in their lifetime (unless business/profession is discontinued)
- Section 87A rebate is auto-calculated during ITR filing - no separate application needed
Frequently Asked Questions (FAQs)
What are the income tax slab rates for FY 2026-27 under the new tax regime?
Under the new tax regime for FY 2026-27 (AY 2027-28), the slab rates are: Up to ₹4 lakh - Nil; ₹4-8 lakh - 5%; ₹8-12 lakh - 10%; ₹12-16 lakh - 15%; ₹16-20 lakh - 20%; ₹20-24 lakh - 25%; Above ₹24 lakh - 30%. The Finance Act 2026 retained these rates without any changes from the previous year, as per Section 115BAC of the Income Tax Act. Health and Education Cess of 4% applies on the calculated tax, and surcharge is applicable for income above ₹50 lakh.
Is income up to ₹12 lakh really tax-free in FY 2026-27?
Yes, under the new tax regime, resident individuals with taxable income up to ₹12 lakh pay zero tax due to the Section 87A rebate of ₹60,000. For salaried employees, after claiming the ₹75,000 standard deduction, gross income up to ₹12.75 lakh becomes effectively tax-free. This benefit applies only to the new regime and requires filing ITR to claim the rebate automatically. The rebate does not apply to income taxed at special rates like capital gains, and is available only to resident individuals, not NRIs, HUFs, or companies.
Which tax regime should I choose for FY 2026-27 - old or new?
Choose the new regime if your total deductions (Section 80C, HRA, home loan interest) are less than ₹4 lakh or if your income is under ₹12.75 lakh. The old regime is better if you claim substantial deductions exceeding ₹4 lakh annually, particularly HRA exemption, Section 80C investments, and home loan interest under Section 24(b). Use an income tax calculator to compare both regimes based on your actual income and deductions before filing ITR. Salaried individuals can switch between regimes every year, but business/professional income earners can switch only once.
What is the Section 87A rebate limit for AY 2027-28?
For AY 2027-28 (FY 2026-27), the Section 87A rebate is ₹60,000 for resident individuals under the new tax regime with taxable income up to ₹12 lakh. Under the old regime, the rebate remains ₹12,500 for income up to ₹5 lakh. The rebate is auto-calculated when filing ITR and applies only to tax on normal slab rates, not special rates like capital gains. Non-residents, HUFs, and companies cannot claim this rebate. Senior citizens (60-80 years) and super senior citizens (above 80 years) can claim the rebate if they meet the income criteria as resident individuals.
Did Budget 2026 change income tax slabs or rates?
No, Budget 2026 presented on 1 February 2026 did not change income tax slab rates under either the new or old regime. Finance Minister Nirmala Sitharaman retained the existing structure introduced in Budget 2025. The basic exemption limit remains ₹4 lakh (new regime) and ₹2.5 lakh (old regime). However, Budget 2026 extended revised ITR filing deadline to 31 March and implemented the new Income Tax Act 2025 effective 1 April 2026, which replaced the Income Tax Act 1961 with simplified provisions and renumbered sections, though substantive tax rates remain unchanged.
Conclusion: Maximize Your Tax Savings for FY 2026-27
Understanding the income tax slab rates for FY 2026-27 (AY 2027-28) is crucial for effective tax planning. With the new regime offering zero tax up to ₹12 lakh income through Section 87A rebate and the old regime providing access to 70+ deductions, Indian taxpayers have genuine options to optimize their tax liability. The Finance Act 2026 has maintained stability in tax rates while introducing procedural improvements like extended ITR filing deadlines.
Whether you're a salaried professional, business owner, or investor, calculating your tax under both regimes and choosing the optimal one can save you lakhs of rupees over your working lifetime. Don't leave money on the table - use TaxFetch's comprehensive suite of tools including our Income Tax Calculator, HRA Calculator, and Capital Gain Calculator to make informed decisions. Start planning your taxes today and explore all our tax automation tools to simplify compliance and maximize savings for FY 2026-27.