Tax Planning for FY 2026-27: Every Deduction That Still Works Under the New Income-tax Act, Worked Examples, and 15 Viral Tax Hacks Checked

The financial year 2026-27, which runs from April 2026 to March 2027, is the first "tax year" under the Income-tax Act, 2025. The rules most people plan around are largely the same as before, but nearly every section has a new number and a few limits have moved: HRA is now worked at 50% of salary in eight cities, not four, children's education allowance has risen from ₹100 to ₹3,000 a month, and the meal-voucher limit is ₹200 a meal. This guide reads each provision on the Income Tax Department's own pages and in the Finance Act, 2026. It shows what still saves tax under each regime, works through four real-life cases, and then tests the tax tips going viral on social media against the law. It does not recommend any product.

Written on 31 October 2026. Sections refer to the Income-tax Act, 2025 and rules to the Income-tax Rules, 2026, each read on incometaxindia.gov.in; old-regime rates and the 4% cess are from the Finance Act, 2026. Old section numbers come from the department's own mapping. Figures are for a resident individual below 60 unless stated, include 4% cess and ignore surcharge (which starts above ₹50 lakh). This is general information, not advice on your return.

The two regimes for tax year 2026-27

The new regime under section 202 applies unless you choose the old one. Someone without business income makes that choice in each year's return, filed by the due date (section 202(4) and rule 136); what you tell your employer only decides how much tax is deducted from salary during the year.

• Rebate (section 156). New regime: income up to ₹12 lakh pays nothing, as up to ₹60,000 of tax is rebated; just above ₹12 lakh, the tax cannot exceed the income above ₹12 lakh. Old regime: up to ₹12,500 is rebated where income is up to ₹5 lakh.
• Standard deduction (section 19). ₹75,000 under the new regime and ₹50,000 under the old, for salary and pension.
• Cess. 4% health and education cess on top of the tax, in both regimes.

Old section numbers, and where they went

The full list, section by section, is in our Income-tax Act translator, built on the department's own mapping.

What each regime lets you claim

The rule behind the "No" column is section 202(2): the new regime is computed without HRA, leave travel, most special allowances, professional tax, interest on a self-occupied home, and every Chapter VIII deduction other than the employer's NPS contribution and a few others. The rules keep only a handful of allowances for it, chiefly those for official travel, transfer and conveyance (rule 280).

Worked examples

1. Salary ₹12.75 lakh, or ₹13 lakh, new regime. After the ₹75,000 standard deduction, ₹12.75 lakh leaves taxable income of exactly ₹12 lakh. Slab tax is ₹60,000, and the rebate removes all of it: nil. At ₹13 lakh, taxable income is ₹12.25 lakh and slab tax ₹63,750, but the rebate caps the tax at the ₹25,000 by which income exceeds ₹12 lakh, so the bill is ₹26,000 with cess. ₹25,000 more salary costs ₹26,000 more tax, which is why a rupee of extra pay above ₹12.75 lakh can feel taxed in full.

2. Salary ₹15 lakh, renting in Pune. Basic pay ₹7.5 lakh, HRA received ₹3.6 lakh, rent ₹35,000 a month (₹4.2 lakh), ₹1.5 lakh in EPF and ELSS, health cover ₹25,000 for the family and ₹50,000 for senior-citizen parents, ₹50,000 in NPS, professional tax ₹2,500.

Here the old regime wins, and Pune's move to the 50% band helps: at the old 40% limit the HRA exemption would have been ₹3 lakh, not ₹3.45 lakh, and the old-regime tax ₹90,480. Without the rent, the new regime would win easily.

3. Salary ₹25 lakh, own home in Bengaluru with a loan. Basic ₹12.5 lakh, home-loan interest ₹2 lakh, section 123 ₹1.5 lakh, health cover ₹25,000, own NPS ₹50,000, professional tax ₹2,500.

At this income the new regime wins by over ₹1.1 lakh even with a home loan, and employer NPS saves a further ₹46,800 within it.

4. A retired person aged 68. Pension ₹9 lakh and bank interest ₹3 lakh. New regime: ₹9 lakh less ₹75,000, plus ₹3 lakh, is ₹11.25 lakh: nil tax. Old regime, even after ₹50,000 under section 153 on the interest and ₹50,000 of health cover under section 126: income ₹10.5 lakh, tax ₹1,30,000. For most pensioners with income near ₹12 lakh, the new regime is the simpler and cheaper choice.

The moves that save the most

1. Employer NPS, in either regime. Section 124 lets an employee deduct the employer's contribution to NPS up to 14% of salary under the new regime. If your employer offers it, moving part of the CTC into NPS is the largest legal saving left in the new regime. The money is locked into pension rules.
2. HRA in the eight 50% cities. Rule 279 adds Hyderabad, Pune, Ahmedabad and Bengaluru to Mumbai, Kolkata, Delhi and Chennai. A tenant there with high rent should re-run the old-regime numbers.
3. The ₹1.5 lakh under section 123. Your EPF, a child's tuition fees and home-loan principal may fill it without any new investment. Schedule XV also lists PPF, ELSS, life insurance, Sukanya Samriddhi, NSC, five-year bank and post office deposits and the Senior Citizen Savings Scheme.
4. Health cover for parents. Up to ₹50,000 more for senior-citizen parents under section 126, including up to ₹5,000 of check-ups that can be paid in cash.
5. Tax-gain harvesting. The first ₹1.25 lakh of long-term gains on listed shares and equity funds each year is tax-free under section 198. Selling holdings older than 12 months to book that much gain, and buying back, raises your cost for the future.
6. Tax-loss harvesting. Losses set off gains under section 108 and carry forward for eight tax years under section 111, if the return is filed in time.
7. Restructuring pay. Meal cards up to ₹200 a meal and gifts below ₹15,000 a year are valued at nil under rule 15, in either regime. Children's education and hostel allowances help only in the old regime.
8. Gifts to parents, not to a spouse. A gift to a relative is tax-free under section 92. Income on money given to a spouse comes back to you under section 99; income on money given to parents is theirs, and may fall within their own nil-tax band.

Fifteen viral tax hacks, checked against the law

What a fake claim costs. Take someone in the 30% slab who claims a ₹1 lakh donation they never made. The tax evaded is ₹31,200 with cess; the penalty for misreporting is 200% of that, ₹62,400; the total bill, before interest, is ₹93,600.

A tax-planning calendar for the year

Frequently Asked Questions

How can I save tax in FY 2026-27? In the new regime, through the ₹75,000 standard deduction and employer NPS of up to 14% of salary. In the old regime, through section 123 (formerly 80C, ₹1.5 lakh), health insurance under section 126, HRA, home-loan interest, your own NPS of ₹50,000 and other deductions. Work out both: the examples above show either can win.

Is income up to ₹12 lakh tax-free in FY 2026-27? Under the new regime, yes: up to ₹60,000 of tax is rebated under section 156 where income is up to ₹12 lakh. For salaried people that means salary up to ₹12.75 lakh, after the ₹75,000 standard deduction.

What is section 80C called under the new Income-tax Act? Section 123 of the Income-tax Act, 2025, with the eligible payments listed in Schedule XV. The limit is still ₹1.5 lakh, and it is available only in the old regime.

Can I claim HRA in the new tax regime? No. Section 202(2) excludes the HRA exemption in Schedule III, Table Sl. No. 11, from the new regime.

Which cities get 50% HRA from tax year 2026-27? Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru, under rule 279 of the Income-tax Rules, 2026. Everywhere else the limit is 40% of salary.

Can I claim employer NPS in the new regime? Yes. Section 124(2) allows the employer's contribution up to 14% of salary under the new regime. Your own additional ₹50,000 under section 124(3) is available only in the old regime.

Which regime is better for a ₹15 lakh salary? It depends on your deductions. With no rent and few investments, the new regime. A Pune tenant with high rent and full section 123 and 126 claims pays less in the old, as the second example shows.

Are the tax-saving tips on social media legal? Some are, such as employer NPS, gain harvesting and gifts to parents. Others are myths, such as claiming section 123 in the new regime or setting off crypto losses. Fake rent receipts, donations and agricultural income count as misreporting, with a penalty of 200% of the tax.

This guide explains the law for tax year 2026-27 as it stood on 31 October 2026. It is not advice on a particular return; for a large decision such as a pay restructure or a property sale, take professional advice.