New Tax Regime Slabs for FY 2026-27 Under the Income-tax Act, 2025: Rates, Rebate, and the Basic Exemption Limit Explained

The Income-tax Act, 2025 came into force on 1 April 2026. It replaced the 1961 Act, renumbered nearly every section, and retired the "previous year / assessment year" pair in favour of a single tax year. What it did not do is change the new-regime rate card. The slabs below are the ones that applied for FY 2025-26, carried into the new Act, and the Finance Act, 2026 left them alone.

So for the year running from 1 April 2026 to 31 March 2027, tax year 2026-27, this is the table.

The new tax regime slabs for tax year 2026-27

The new regime is the default. Unless you opt out, this is the rate card your employer uses for TDS and the one the return applies.

The slabs are the same for everyone under the new regime. There are no separate senior-citizen or super-senior slabs here; those exist under the old regime only.

On top of the slab tax:

• Health and education cess of 4% on the tax after rebate and surcharge.
• Surcharge of 10% where total income exceeds ₹50 lakh, 15% above ₹1 crore, and 25% above ₹2 crore. The new regime caps surcharge at 25%; the 37% band applies under the old regime only. Marginal relief applies at each step so that crossing a threshold never costs more than the extra income.

What comes off before the slabs apply

The new regime allows very little, but the little it allows matters:

• Standard deduction of ₹75,000 against salary and pension. Under the old regime it is ₹50,000.
• Employer's contribution to NPS under section 80CCD(2) of the 1961 Act, carried into the 2025 Act: up to 14% of basic plus dearness allowance.
• Family pension deduction of one-third, capped at ₹25,000.

Everything else that people associate with tax planning, section 80C, 80D, HRA exemption, LTA, interest on a self-occupied home loan, is not available under the new regime. That is the whole trade: lower rates in exchange for giving those up. How to decide which side of that trade you are on is a separate question with its own method.

The rebate: why "tax-free up to ₹12 lakh" is true, and where it stops

Section 156 of the 2025 Act (the old section 87A) gives a resident individual a rebate of up to ₹60,000 where total income does not exceed ₹12,00,000. Tax on exactly ₹12 lakh under the slabs above is ₹60,000, so the rebate wipes it out. A salaried resident with ₹12,75,000 of gross salary lands on ₹12 lakh after the standard deduction and pays nothing.

Three things people get wrong about it:

1. It is a cliff with a cushion, not a slope. At ₹12,00,001 the rebate is gone in principle, but marginal relief steps in: the tax cannot exceed the amount by which income exceeds ₹12 lakh. So ₹12,10,000 of income carries at most ₹10,000 of tax, not the ₹61,500 the slabs alone would produce. The cushion runs out at about ₹12.7 lakh of total income, beyond which the full slab tax applies.
2. It does not touch capital gains taxed at special rates. Long-term gains on listed equity under section 112A are taxed at 12.5% above the ₹1.25 lakh exemption regardless of the rebate; short-term gains under section 111A at 20% likewise. The rebate is against slab-rate tax.
3. It is for residents only. A non-resident with ₹10 lakh of Indian income pays slab tax on it. The NRI calculator applies that switch after it has settled your residential status.

The basic exemption limit is ₹4 lakh, not ₹12 lakh

This is the question that has been rising fastest in search this year, and the two numbers get conflated constantly.

The basic exemption limit is the top of the nil slab: ₹4,00,000. The rebate threshold is ₹12,00,000. They do different jobs.

The exemption limit is the number the law reaches for whenever it asks whether income is "chargeable to tax" at all: the obligation to file a return, the threshold below which TDS on certain payments need not be deducted, the point at which a non-resident becomes liable. The rebate is a relief applied after tax has been computed. Income of ₹9 lakh is chargeable, produces ₹40,000 of slab tax, and then has that tax cancelled by the rebate. It is not exempt; it is taxed and relieved.

The practical consequence: a resident with ₹9 lakh of income and no tax to pay still has to file a return, because income exceeds the exemption limit. Skipping it because "there is no tax" is the mistake that produces a notice for non-filing.

Under the old regime, for comparison, the exemption limit is ₹2.5 lakh (₹3 lakh at 60, ₹5 lakh at 80) and the rebate runs only to ₹5 lakh of income.

Three worked examples

Salary ₹10 lakh, nothing else. Less ₹75,000 standard deduction: total income ₹9,25,000. Slab tax: nil on the first ₹4 lakh, ₹20,000 on the next ₹4 lakh, ₹12,500 on the last ₹1.25 lakh: ₹32,500. Rebate ₹32,500. Tax payable: nil. A return is still due.

Salary ₹16 lakh, nothing else. Total income ₹15,25,000. Slab tax: ₹20,000 + ₹40,000 + ₹48,750 = ₹1,08,750. No rebate. Cess ₹4,350. Tax payable: ₹1,13,100. Add ₹3 lakh of HRA exemption, ₹2 lakh of home-loan interest and ₹2.5 lakh of Chapter VI-A deductions, and the old regime comes to ₹75,400 and wins. The Tax Decision Engine shows both totals and how much deduction it took to flip the answer.

Salary ₹12,90,000, nothing else. Total income ₹12,15,000, just past the rebate line. Slab tax ₹62,250, but marginal relief caps it at the ₹15,000 by which income exceeds ₹12 lakh. Cess ₹600. Tax payable: ₹15,600. The ₹15,000 of salary above the line cost ₹15,600 in tax; a ₹15,000 contribution routed through employer NPS instead would have cost nothing.

Choosing the old regime instead

Since the new regime is the default, no form is needed to stay in it. Opting out depends on what income you have:

• No business or professional income: choose the old regime in the return itself, each year, with no separate form. You can go back and forth annually.
• Business or professional income: the option is exercised by filing Form 10-IEA before the due date of the return, and it is close to permanent: once you opt out, you can return to the new regime only once, and after that the old regime is closed to you for good. The Income-tax Rules, 2026 are renumbering forms as they are notified (Form 13 became Form 128, for instance), so check the current number on the e-Filing portal before you file.

The employer's payroll declaration is a projection for TDS. The regime you actually adopt is the one in the return.

Where the rules sit

• Rates and slabs for the new regime: the Income-tax Act, 2025, carrying forward section 115BAC of the 1961 Act, as read with the Finance Act, 2026. The official text is on incometaxindia.gov.in.
• Rebate: section 156 of the 2025 Act (formerly section 87A).
• Surcharge and cess: the First Schedule to the Finance Act, 2026.
• Standard deduction, employer NPS, family pension: the salary and Chapter VI-A provisions of the 2025 Act as they apply to the new regime.

If you want the tax computed on your own figures rather than read off a table, the basic income tax calculator does both regimes side by side and shows the slab-by-slab working.

Frequently Asked Questions

What is the basic exemption limit in the new tax regime for FY 2026-27? ₹4,00,000. That is the top of the nil slab and the figure the law uses for whether income is chargeable and whether a return must be filed. The ₹12 lakh figure people quote is the rebate threshold, which cancels tax already computed; it does not make the income exempt.

Is income up to ₹12 lakh tax-free under the new regime? For a resident individual with income taxed at slab rates, yes: the section 156 rebate of up to ₹60,000 equals the slab tax on ₹12 lakh. A salaried person reaches that with ₹12,75,000 of gross salary because of the ₹75,000 standard deduction. Capital gains taxed at special rates are outside the rebate, and non-residents do not get it.

Do I have to file a return if my income is below ₹12 lakh and I owe no tax? Yes, if your total income exceeds ₹4 lakh, the basic exemption limit. The rebate removes the tax, not the filing obligation. Filing is also how you claim any TDS refund.

Did the Income-tax Act, 2025 change the new regime slabs? No. The 2025 Act renumbered sections and replaced "previous year" and "assessment year" with "tax year", but carried the FY 2025-26 rate card forward unchanged. The Finance Act, 2026 also left the slabs, rebate and standard deduction as they were.

What happens if my income is slightly above ₹12 lakh? Marginal relief applies. Tax cannot exceed the amount by which your total income exceeds ₹12 lakh, so ₹12,10,000 carries at most ₹10,000 of tax plus cess. The relief tapers out at about ₹12.7 lakh of total income, after which the ordinary slab tax applies in full.

Is Form 10-IEA needed to choose the old regime? Only if you have business or professional income. Salaried and other taxpayers choose the regime in the return each year. With business income the form must be filed before the return's due date, the choice is near-permanent, and the form number should be checked on the portal since the 2026 Rules are renumbering forms.

Are the slabs different for senior citizens under the new regime? No. The new regime has one set of slabs for all individuals. The higher exemption limits of ₹3 lakh and ₹5 lakh for those aged 60 and 80 exist under the old regime only.

General information for tax year 2026-27, not advice. The rates are those of the Income-tax Act, 2025 as amended by the Finance Act, 2026 as published; confirm against the official text before acting.