The financial year 2026-27 brings one of the most significant tax transitions in six decades: the Income Tax Act 2025 has replaced the 1961 Act for income earned from 1 April 2026 onwards. This guide covers the slabs, deductions, regime choice and filing mechanics you actually need.
Quick answer: slabs for FY 2026-27 (New Regime)
| Income Range | Tax Rate |
|---|---|
| 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% |
Plus a 4% Health & Education Cess on the total tax. A standard deduction of ₹75,000 applies for salaried individuals. And the Section 87A rebate makes income up to ₹12 lakh effectively tax-free.
What changed with the Income Tax Act 2025
The new Act came into effect on 1 April 2026. Key terminology changes to watch:
- "Previous year" is replaced by tax year
- "Assessment year" is discontinued entirely
- The new tax regime, previously under Section 115BAC, is now under Section 202
- Several sections have been renumbered — cross-reference if citing in filings
Slab rates, deduction limits and rebate amounts remain unchanged from the Budget 2025 structure. So your tax liability for FY 2026-27 is the same math as FY 2025-26 — only the legal references have shifted.
Old vs New Regime — which should you pick?
The new regime is default. For most middle-class salaried earners without significant deductions, it wins. But if you claim ₹1.5L under 80C, HRA, home loan interest, and 80D combined, the old regime can still save you more.
Quick rule of thumb: if total deductions (excluding standard deduction) exceed ₹3.75 lakh, the old regime is usually better at ₹15L CTC. Below that, go new.
Use our New Regime Calculator and Old Regime Calculator to compare your exact tax outgo under both.
Section 87A rebate — the real reason ₹12L is "tax-free"
Under the new regime, anyone with taxable income up to ₹12 lakh gets a rebate that wipes out the entire tax liability (up to ₹60,000). For salaried individuals with the ₹75,000 standard deduction, that makes effective tax-free salary ₹12.75 lakh.
There is also a marginal relief band just above ₹12 lakh — if your income is ₹12.10 lakh, you do not suddenly pay ₹60,100 in tax. The rebate tapers.
Deductions you can still claim (New Regime)
- Standard deduction of ₹75,000 (salary / pension)
- Employer NPS contribution under Section 80CCD(2) up to 14% of basic salary
- Home loan interest on let-out property under Section 24(b)
- Agniveer Corpus Fund contribution under Section 80CCH
Everything else — 80C, 80D, HRA, home loan on self-occupied property — is unavailable in the new regime.
Filing mechanics for AY 2026-27
Income earned during FY 2025-26 is still filed under the old Income Tax Act 1961 when you file in July 2026. Only income earned from 1 April 2026 onwards (tax year 2026-27) is governed by the new Act. Advance tax for the current tax year uses the new Act's provisions from June 2026.
Recommended next steps
- Run your numbers through the new regime calculator
- Optimize your HRA claim with the HRA calculator
- Compute your in-hand pay with the take-home calculator
This guide is for informational purposes only and does not constitute professional tax advice. Consult a qualified CA for your specific situation.