Income Tax Slab FY 2026-27 Explained

Before you start your income tax planning for FY 2026-27, it’s important to be aware of a crucial update: For the financial year 2026-27, Finance Minister Nirmala Sitharaman has not made any changes to the existing income tax slabs under the revised tax regime. This means the slab rates will remain the same, but the actual tax impact may vary for each taxpayer due to rebates, standard deductions, and compliance rules. In this article, we will understand the latest income tax slabs, applicable rates, and the real impact of the calculations in a straightforward and easy-to-understand manner.

What Is an Income Tax Slab?

An income tax slab means that your total taxable income is divided into different segments (ranges), and a different tax rate is applied to each segment. This is called a progressive tax system – meaning that as income increases, the marginal tax rate also increases. The objective is to ensure that lower-income individuals bear a lower tax burden, while higher-income groups pay proportionally more tax.

Tax System Comparison

Tax System Type	How it works	The situation in India
Slab-based Tax	Different tax rates apply to different income ranges.	Applicable to Individuals/HUF
Flat Tax	A single rate applies to the entire taxable income.	Not applicable to individual tax.
Special Rate Tax	A different fixed rate applies to certain income levels.	Capital gains, lottery, crypto etc.

Income Tax Slab for FY 2026-27 — New Tax Regime 

Taxable Income (₹)	Tax Rate
Up to ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

The tax slab structure has not been changed in Budget 2026, but emphasis has been placed on keeping the new tax regime simple and compliance-friendly. This regime is now the default option.

New Tax Regime (FY 2026–27) — Key Features & Benefits

The new tax regime for FY 2026–27 includes a slab structure along with some practical features that directly benefit salaried and pensioner taxpayers.

Feature	What are the rules?	Practical Benefit
Section 87A Rebate	A rebate of up to ₹60,000 is available on taxable income up to ₹12,00,000.	Effectively, the tax on income up to ₹12 lakh can be zero.
Standard Deduction	₹75,000 for salaried employees and pensioners.	For salaried individuals, the effective tax-free level can reach up to ₹12.75 lakh.
Marginal Relief	Available for incomes slightly above ₹12 lakh.	Relief from a sudden tax jump when income increases slightly.
Surcharge Cap	Under the new regime, the maximum surcharge is 25% (for income above ₹2 crore).	Lower surcharge cap for high-income taxpayers
Uniform Slabs	The same slab rates apply to all age groups.	There is no separate tax slab or confusion for senior/super senior citizens.

Old Tax Regime – Slab Rates

The Old Tax Regime continues in FY 2026–27, and there have been no changes to the slab rates. A key feature of this regime is that the slab limits vary depending on the taxpayer’s age, and several deductions and exemptions can be claimed. If an individual has significant deductions such as those under Section 80C, HRA, and home loan interest, the old regime can prove beneficial in many cases.

Old Regime Slabs – Individuals (< 60 years), NRI, HUF

Taxable Income (₹)	Tax Rate
Up to ₹2,50,000	Nil
₹2,50,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

Old Regime Slabs – Senior Citizens (60–79 years)

Taxable Income (₹)	Tax Rate
Up to ₹3,00,000	Nil
₹3,00,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

Old Regime Slabs – Super Senior Citizens (80 years or older)

Taxable Income (₹)	Tax Rate
Up to ₹5,00,000	Nil
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

Old Tax Regime – Main Benefits (Deduction Based System)

Benefit	Limit / Rule
Standard Deduction	₹50,000 (salaried & pensioners)
Section 87A Rebate	₹12,500 (for income up to ₹5 lakh)
Section 80C	Up to ₹1.5 lakh
Section 80D	Health insurance deduction
HRA / LTA	Allowed
Home Loan Interest (Sec 24)	Up to ₹2 lakh
Education Loan (80E)	Interest deduction

New vs Old Tax Regime Comparison (FY 2026–27)

Taxpayers have two options available in FY 2026–27: the New Tax Regime and the Old Tax Regime. Choosing the right regime directly impacts your final tax bill. The new regime offers lower slab rates and a higher rebate, but deductions are limited. The old regime has comparatively higher rates, but a longer list of deductions and exemptions is available.

Old vs New Tax Regime

Parameter	New Tax Regime	Old Tax Regime
Tax Slabs Structure	More slabs, gradual rate increase	Fewer slabs, rapid rate increase.
Basic Exemption Limit	₹4,00,000 (same for all age groups)	Age-based – ₹2.5L / ₹3L / ₹5L
Standard Deduction	₹75,000 (salaried & pensioners)	₹50,000
Section 87A Rebate	₹60,000 (up to ₹12L income)	₹12,500 (income up to ₹5 lakh)
Section 80C Deduction	Not allowed	Up to ₹1.5L is allowed.
Section 80D (Health Insurance)	Not allowed	Allowed
HRA Exemption	Not allowed	Allowed
LTA Exemption	Not allowed	Allowed
Home Loan Interest (Sec 24)	Not allowed	Up to ₹2L
Education Loan Interest (80E)	Not allowed	Allowed
Other Chapter VI-A Deductions	Mostly not allowed	Widely allowed
Maximum Surcharge Rate	25% (high income cases)	37% (high income cases)
Marginal Relief	Available (₹12L crossing cases)	Available (high surcharge bands)
Slab by Age	Same for all	Age-wise different
Documentation Need	Low	High (proof required)
Filing Complexity	Simple	Detailed
Default Option	Yes (AY 2024-25 onward)	Detailed

Surcharge & Cess on Income Tax Slab FY 2026–27

Even after calculating tax based on the income tax slabs, the final payable tax doesn’t end there. High-income taxpayers are subject to a surcharge, and a 4% Health and Education Cess is added to the tax liability of all taxpayers.

Surcharge Rates 

Total Income (₹)	Surcharge Rate (New Regime)
Up to ₹50 lakh	No surcharge
₹50 lakh – ₹1 crore	10%
₹1 crore – ₹2 crore	15%
₹2 crore – ₹5 crore	25%
Above ₹5 crore	25% (capped in new regime)

New vs Old Regime – Maximum Surcharge Comparison

Maximum Surcharge Rate	Maximum Surcharge Rate
New Tax Regime	25%
Old Tax Regime	37%

Income Tax Changes Effective from 1 April 2026 – Budget 2026–27

1. New Tax Regime Continues

Rule	Updated Position (From 1 April 2026)
New tax regime	Continue & strengthened
Tax-free income (new regime)	Effective zero tax up to ₹12,00,000
Salaried effective zero level	₹12.75 lakh (after a standard deduction of ₹75,000)
Slab rates	No change announced
Objective	Stability + simplicity

2. Section 87A Rebate – Continued Relief

Provision	Updated Rule
Section 87A rebate	Continue
Maximum rebate	₹60,000
Eligible income	Up to ₹12 lakh
Result	Zero tax liability possible

3. Standard Deduction & Senior Citizen Relief

Category	Deduction Rule
Salaried / Pensioners	₹75,000 standard deduction continue
Senior citizen deduction limit	₹50,000  ₹1,00,000 increased
Impact	Lower taxable income

3.  Interest Income Exemptions – Continue

Section	Limit
Section 80TTA	₹50,000 (individuals)
Section 80TTA	₹1,00,000 (senior citizens)
Applies to	Interest income

4. Compliance Simplification – New Tax Framework

Area	Change
New Income Tax Act	Income Tax Act 2025 applicable from 1 April 2026
Rules	Draft Income Tax Rules 2026 introduced
Total rules	511 – 333
Total forms	399 – 190
Form design	Simplified & user-friendly
Goal	Easy filing & less confusion

5. Filing & Procedure Relaxations

Compliance Area	Update
ITR filing last date	ITR-1/2: 31 July
Non-audit business/trust	31 August
Revised return	Allowed till 31 March
15G/15H filing	Depository route allowed
Lower/Nil TDS certificate	Online process

6. TDS / TCS Rationalisation

Area	New Rule
Foreign travel TCS	Reduced to 2%
LRS education/medical TCS	Reduced to 2%
Certain TDS/TCS rules	Rationalised

7. Special Exemptions Introduced

Category	Tax Treatment
MACT compensation interest	Fully exempt
Disability pension (forces)	Exempt
Land acquisition (RFCTLARR)	Exempt

8. Capital Market & Investment Tax Changes

Area	Update
Share buyback	Taxed as capital gains
STT – Futures	0.02% – 0.05%
STT – Options	0.15%
SGB exemption	Only if held till maturity & original issue

Conclusion 

The tax structure for FY 2026-27 is stable, but who will actually benefit depends entirely on your income pattern and deductions. The new regime is simpler, while the old regime might still be useful for those with significant deductions. Choosing a regime without comparing them could be a mistake. Calculating your tax liability before the end of the financial year is the smartest move.

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