New Tax Regime Slabs for Tax Year 2026-27, With Worked Examples

For tax year 2026-27 (1 April 2026 to 31 March 2027), an individual under the new tax regime pays nothing on the first ₹4 lakh of total income, then 5% up to ₹8 lakh, 10% up to ₹12 lakh, 15% up to ₹16 lakh, 20% up to ₹20 lakh, 25% up to ₹24 lakh and 30% above that. A resident individual whose total income does not exceed ₹12 lakh gets a rebate of up to ₹60,000, which wipes out the tax. With the ₹75,000 standard deduction, that means a salaried resident earning up to ₹12.75 lakh a year pays no income tax, provided the income is taxed at slab rates.

These rates come from section 202(1) of the Income-tax Act, 2025, which applies from tax year 2026-27. The new regime is the default: it applies unless you opt out.

The slabs in section 202(1)

The same slabs apply to every individual under the new regime, whatever their age. The higher exemption limits for senior citizens (₹3 lakh at sixty, ₹5 lakh at eighty) appear only in the old-regime rates in Part I-B of the First Schedule to the Finance Act, 2026.

Step 1: From salary to total income

Section 19(1) allows a standard deduction of ₹75,000 (or the salary, if lower) when your tax is computed under section 202(1). Under the old regime the figure is ₹50,000. Professional tax paid is not deductible under the new regime, because section 202(2) excludes it.

Section 202(2) also removes most exemptions and deductions from the new-regime computation. Among them are HRA, leave travel concession, interest on a self-occupied house, and almost all of Chapter VIII. The exceptions include the employer’s NPS contribution under section 124(1). The practical result: for most salaried people, total income is gross salary minus ₹75,000, plus any other income.

Step 2: The rebate under section 156

Section 156(2) gives a resident individual taxed under section 202(1) a deduction from the tax itself:

• Total income up to ₹12,00,000: 100% of the tax, capped at ₹60,000. Since tax at exactly ₹12 lakh is ₹60,000, the result is zero.
• Total income above ₹12,00,000: marginal relief. If the tax on your income is more than the amount by which your income exceeds ₹12 lakh, the rebate equals that difference. You never pay more tax than the income you earned above ₹12 lakh.

Section 156(3) limits the rebate to tax at the section 202(1) rates. The rebate does not reach capital gains taxed at special rates, such as listed equity gains under sections 196 and 198. A person with ₹10 lakh of salary income and ₹2 lakh of short-term equity gains may still owe tax on those gains.

Worked examples

All four examples assume a resident individual under the new regime whose only income is salary, taxed at slab rates. Figures are computed from section 202(1), the section 156 rebate and 4% Health and Education Cess.

How B works. Tax on ₹12,50,000 is ₹60,000 on the first ₹12 lakh plus 15% of ₹50,000, a total of ₹67,500. Income above ₹12 lakh is ₹50,000. The tax exceeds that excess by ₹17,500, so the rebate is ₹17,500 and the tax before cess becomes ₹50,000.

Where marginal relief stops. The relief shrinks as income rises, because slab tax grows by 15 paise per rupee while the excess grows by a full rupee. The two meet at a total income of about ₹12,70,588. Above that, no rebate is available.

Surcharge above ₹50 lakh

Section 3(4) of the Finance Act, 2026 sets the surcharge for income taxed under section 202:

Under the new regime the surcharge does not rise to 37%. On tax attributable to dividend income or capital gains under sections 196, 197 and 198, surcharge is capped at 15%. Marginal relief also applies at each surcharge threshold: the extra tax plus surcharge cannot exceed the income earned above that threshold. Cess at 4% is then charged on tax plus surcharge. The surcharge and marginal relief calculator works this out for a given income.

Staying in or opting out

The new regime applies unless you exercise the option in section 202(4):

• No business or professional income: you choose the old regime along with the return filed under section 263(1). The choice can be made year by year.
• Business or professional income: the option must be exercised on or before the section 263(1) due date. It then continues for later years, can be withdrawn only once, and after withdrawal cannot be exercised again while you still have such income.

The old regime can still work out cheaper when large deductions are available, typically HRA plus section 123 (earlier 80C) plus interest on a self-occupied house. Run both computations before deciding.

What this page does not cover

• Returns for FY 2025-26 (AY 2026-27) are filed under the Income-tax Act, 1961, with that year’s rates.
• Non-residents do not get the section 156 rebate.
• Agricultural income above ₹5,000 can raise the rate on other income under section 3(2) of the Finance Act, 2026.

Where this fits

• Run your own numbers: income tax calculator
• Choosing a regime: old vs new tax regime
• A salary worked through: take-home salary on ₹12 LPA
• Rent and the new regime: HRA exemption for tax year 2026-27

Sources. Income-tax Act, 2025, sections 19, 156 and 202, as published in the Gazette of India on 21 August 2025. Finance Act, 2026, section 3 and First Schedule Part I-B, Gazette of India, 30 March 2026.