Income Tax Slabs for AY 2026–27 (FY 2025–26): What Changed & Who Benefits

Income Tax Slabs AY 2026-27 (FY 2025-26)

Every April, the math changes on how much of your income you actually keep. For AY 2026–27 (FY 2025–26), the Union Budget 2025 reshaped the New Tax Regime with a wider 7‑slab structure and relief designed so that no tax is payable on total income up to ₹12 lakh—and up to ₹12.75 lakh for salaried taxpayers thanks to a higher standard deduction of ₹75,000. The Old Regime stays available for people who can save more via deductions (HRA, home‑loan interest, 80C/80D/NPS, etc.). This guide explains the latest slab rates under the New and Old Regimes, how nil tax up to ₹12L (₹12.75L salaried) works, and who benefits with clear example.

In this Income tax slab guide, you’ll learn:

• The latest slab rates for AY 2026–27 under both regimes
• How the ₹12L / ₹12.75L zero‑tax thresholds actually work (and where they don’t)
• 87A rebate basics, marginal relief just over ₹12L, and who’s not eligible
• Old vs New comparisons at common income levels with real examples
• Special notes for seniors and NRIs
• Practical planning tips to choose the right regime this year

AY vs FY — quick refresher

• FY 2025–26 (1 Apr 2025–31 Mar 2026) is when you earn the income.
• AY 2026–27 is when you report and pay tax on that income.

New Tax Regime (Default): Slabs for FY 2025–26 / AY 2026–27

Budget 2025 introduced a 7‑slab grid for Income tax slab under the New Regime and lifted the salaried standard deduction to ₹75,000. Together with the enhanced Section 87A rebate (max ₹60,000), this structure ensures nil tax up to ₹12 lakh of total income in the new regime—effectively up to ₹12.75 lakh for salaried after the standard deduction. Important: this zero‑tax promise excludes special‑rate income (like certain capital gains).

Add 4% Health & Education Cess to the computed tax; surcharge applies at higher incomes. (i.e. 5% for income between ₹50 lakhs and ₹1 crore, 15% for income between ₹1 crore and ₹2 crore, 25% for income between ₹2 crore and ₹5 crore and 37% for income over ₹5 crore)

Why “zero tax up to ₹12/₹12.75 lakh”? Under the income tax new slabs, tax on ₹12,00,000 equals ₹60,000 (₹20,000 on the 4–8L band + ₹40,000 on the 8–12L band). With 87A rebate capped at ₹60,000, net tax becomes nil. For salaried, you first reduce ₹75,000 standard deduction from salary; therefore ₹12.75 lakh salary → ₹12 lakh taxable → ₹0 tax.

Marginal relief just over ₹12L: If your taxable income is a little above ₹12L, a marginal relief ensures you don’t pay more tax than the excess income. Example: at ₹12,10,000 taxable, slab tax is ₹61,500, but marginal relief reduces payable tax to only ₹10,000 (before cess).

Old Tax Regime (with deductions): Slabs unchanged

The Old Regime of Income tax slab remains useful if you maximize deductions/exemptions (HRA, home‑loan interest, 80C, 80D, NPS, etc.). Slabs are largely unchanged, and the salaried standard deduction remains ₹50,000. Senior and super‑senior citizens get higher basic exemption limits in Old (₹3L and ₹5L respectively).

Individuals (<60 years):

• 0 – ₹2,50,000: Nil
• ₹2,50,001 – ₹5,00,000: 5%
• ₹5,00,001 – ₹10,00,000: 20%
• Above ₹10,00,000: 30%
• Senior citizens (60–<80 years): basic exemption ₹3,00,000
• Super‑senior (80+): basic exemption ₹5,00,000
• Standard deduction (Old Regime): ₹50,000

Who benefits from which regime? (Simple and realistic scenarios)

Basis for numbers: Income tax slab for new regime has 7 slabs and NIL tax up to ₹12 lakh (₹12.75 lakh for salaried after ₹75,000 standard deduction). Marginal relief softens the tax just above ₹12L, and special‑rate income (e.g., certain capital gains) is excluded from the rebate. Old regime standard deduction = ₹50,000

1) Salaried at ₹12.75 lakh (no capital gains): New Regime wins cleanly

Suppose your CTC is ₹12.75L and it’s all salary.

• New Regime: Salary ₹12.75L − standard deduction ₹75k = taxable ₹12.00L → slab tax ₹60,000 → 87A rebate ₹60,000 → tax ₹0 (cess also zero).
• Old Regime (no other deductions): Taxable ₹12.25L (after ₹50k standard deduction). Slab tax = ₹12,500 (2.5–5L @5%) + ₹1,00,000 (5–10L @20%) + ₹67,500 (10–12.25L @30%) = ₹1,80,000 → +4% cess ₹7,200 → ₹1,87,200.

Verdict (as per my view): At this income level, New Regime is decisively better by ~₹1.87 lakh.

2) Just over ₹12 lakh (say ₹12.10L taxable): New still wins—and marginal relief caps the jump

Suppose your taxable income (after standard deduction, if any) is ₹12.10L.

New Regime: Slab tax ₹61,500, but marginal relief reduces payable tax to only the excess over ₹12L → ₹10,000 (before cess) → ₹10,400 with cess.

Verdict (based on the facts): New remains attractive a little over ₹12L. There’s no sudden cliff.

3) Salaried at ₹13.0–₹14.0 lakh (simple salary, few deductions): New Regime usually lower

Suppose salary ₹13.50L, no capital gains, no big HRA/home‑loan interest.

• New Regime: Deduct ₹75k, then apply the 7‑slab grid. You’re past the full rebate zone; tax rises gradually (marginal relief ends near ₹12.75L total income).
• Old Regime: Even after ₹50k standard deduction, without large 80C/80D/HRA, total tax tends to be higher than new.

Verdict (as per my view): For plain‑vanilla salaried in this range, New tends to be more tax‑efficient.

4) Salaried at ₹18 lakh with moderate deductions (~₹3.0L): New Regime still ahead

Suppose salary ₹18L and you can claim ₹3.0L deductions in Old (80C ₹1.5L + 80D ₹25k + some HRA/interest), plus the ₹50k standard deduction.

• Old Regime: Taxable ≈ ₹14.5L → slab tax ₹2,47,500 → +4% cess ₹2,57,400.
• New Regime: Taxable = ₹18L − ₹75k = ₹17.25L → slab tax ₹1,45,000 → +4% cess ₹1,50,800.

Verdict (based on the numbers): Even with ₹3.0L deductions in Old, New income tax slab is ~₹1.06 lakh cheaper here. Old starts winning only when your total deductions/exemptions are quite high.

5) Salaried at ₹18 lakh with heavy deductions (HRA + Home‑loan interest + 80C/80D/NPS): Old can win

Suppose you legitimately claim ~₹6.45L (or more) of deductions in addition to the ₹50k standard deduction in Old (e.g., HRA exemption, home‑loan interest, 80C ₹1.5L, 80D ₹25k/₹50k, NPS 80CCD(1B) ₹50k, etc.).

• Old Regime: Taxable ≈ ₹11.05L → slab tax around ₹1.32–₹1.45L → +4% cess ≈ ₹1.37–₹1.51L.
• New Regime: ≈ ₹1,50,800 (as above).

Verdict (as per my view): On ₹18L salaries, Old income tax slab becomes competitive only when aggregate deductions/exemptions exceed ~₹6.5L. If your deductions are lower than that, stay with New.

6) Senior citizen (60–<80) with salary ₹9 lakh and meaningful deductions: Old can edge out

Suppose age 65, salary ₹9L, you claim 80C ₹1.5L, 80D ₹50k (senior limit), HRA exemption ₹1.25L and Old standard deduction ₹50k.

• Old Regime (senior slabs): Taxable = ₹9L − (1.5 + 0.5 + 1.25 + 0.5) = ₹5.25L. Tax = ₹10,000 (3–5L @5% on ₹2L) + ₹5,000 (5–5.25L @20% on ₹0.25L) = ₹15,000 → +4% cess ₹15,600.
• New Regime: Taxable = ₹9L − ₹75k = ₹8.25L → slab tax ₹22,500 → +4% ₹23,400.

Verdict (as per my view): For seniors with higher deductions (and higher basic exemption in Old), Old income tax slab can beat New. If deductions are modest, New income tax slab usually wins.

7) NRI salaried at ₹10 lakh (no capital gains): New Regime generally lower

Suppose you are NRI with salary ₹10L.

• Key rule: 87A rebate is for resident individuals only. NRIs cannot claim it under either regime.
• New Regime (standard deduction applies to salary): Taxable ₹9.25L (₹10L − ₹75k) → slab tax ₹32,500 → +4% ₹33,800.
• Old Regime (no other deductions): Taxable ₹9.5L (₹10L − ₹50k) → slab tax ₹1,02,500 → +4% ₹1,06,600.

Verdict (as per my view): New is usually much cheaper for NRIs on simple salary because 87A isn’t available to them and the new slabs are more forgiving.

8) Investor with capital gains (salary + gains): New’s “zero up to ₹12/₹12.75L” doesn’t cover the gains

Suppose salary ₹10L and LTCG ₹1L (or STCG u/s 111A). Even if your salary side qualifies for NIL tax under the new regime, special‑rate incomes stay taxable at their own rates; 87A is not available on special‑rate income from AY 2026–27. Keep them separate in your math.

Detailed FAQ

Q1. What are the Income Tax Slabs AY 2026-27 (FY 2025-26) in the New Regime?

The New Regime has seven slabs:

• ₹0–4,00,000: 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%
  In addition, you must add 4% health and education cess, plus surcharge for higher incomes.

Q2. What is the standard deduction for AY 2026-27?

In FY 2025-26, salaried and pensioners can claim ₹75,000 as standard deduction in the New Regime, while the Old Regime continues with a ₹50,000 deduction. This higher deduction increases the effective nil-tax salary threshold.

Q3. How is “nil tax up to ₹12 lakh” achieved in the New Regime?

If your taxable income is ₹12 lakh, the slab tax works out to ₹60,000. The Section 87A rebate, capped at ₹60,000, cancels this completely. For salaried taxpayers, the ₹75,000 standard deduction brings taxable income down from ₹12.75 lakh to ₹12 lakh—making ₹12.75 lakh salary tax-free.

Q4. Does the 87A rebate apply to NRIs?

No, the rebate under Section 87A is available only to resident individuals. Non-resident Indians (NRIs) cannot claim this relief, regardless of income level or chosen regime.

Q5. Does the “nil tax up to ₹12/₹12.75L” cover capital gains?

No. Special-rate incomes like short-term capital gains under section 111A or long-term capital gains are not covered under the nil-tax limit. These must be computed separately at their prescribed rates.

Q6. What is marginal relief just above ₹12 lakh?

If your taxable income slightly exceeds ₹12,00,000, a marginal relief ensures your tax does not exceed the extra income earned. Example: at ₹12,10,000, the slab tax is ₹61,500, but marginal relief restricts payable tax to only ₹10,000 before cess.

Q7. Which is better for a salaried person with few deductions?

For salaried taxpayers with no housing interest or large exemptions, the New Regime is usually better. Around ₹12–13 lakh salary levels, the combination of the 87A rebate and the higher standard deduction make the New Regime more tax-efficient.

Q8. When can the Old Regime save more?

The Old Regime works in your favor if you have high deductions such as full HRA exemption, home-loan interest, 80C, 80D, and NPS contributions. In such cases, your taxable income may fall well below what it would be under the New Regime.

Q9. What are the basic exemption limits for seniors in the Old Regime?

Senior citizens (60–<80 years) enjoy a basic exemption of ₹3,00,000, while super-seniors (80+) get ₹5,00,000. This higher exemption is unique to the Old Regime; the New Regime has a common slab structure regardless of age.

Q10. Can I switch between the New and Old Regime every year?

Salaried taxpayers can decide each year at the time of filing their return. However, those with income from business or profession face restrictions and cannot switch back and forth freely.

Q11. How do I compute taxable salary in the New Regime?

Start with gross salary, subtract the ₹75,000 standard deduction, and then apply the 7-slab grid. Exemptions like HRA and deductions like 80C are not available. Finally, add 4% cess and surcharge where applicable.

Q12. Are the Income Tax Slabs AY 2026-27 (FY 2025-26) the same in Old Regime?

The Old Regime slabs remain: 0–2.5 lakh Nil, 2.5–5 lakh 5%, 5–10 lakh 20%, and above 10 lakh 30%. For seniors, the basic exemption increases to ₹3 lakh, and for super-seniors, ₹5 lakh.

Pro planning tips for FY 2025–26

• Do both calculations (Old vs New) once as per income tax slab your annual numbers stabilize—salary structure, HRA, home‑loan interest, 80C/80D/NPS, and any capital gains.
• If your salary is simple and around ₹12–13 lakh, New Regime is typically optimal due to the 87A relief and higher standard deduction for salaried.
• If you have large deductions (full 80C + 80D + HRA + housing interest + NPS), Old might still compete—don’t assume; compute.
• Keep special‑rate income (like certain capital gains) separate; the zero‑tax promise doesn’t apply to them.
• Seniors: test Old once (higher basic exemption + medical limits).
• NRIs: remember no 87A; plan cash flows accordingly.

Disclaimer:
The information provided in this article is for general informational purposes only and does not constitute professional tax advice. Income tax rules are subject to amendments, notifications, and judicial interpretations. Readers are advised to verify the latest provisions of the Income-tax Act, 1961, and consult a qualified Chartered Accountant or tax professional for advice tailored to their individual circumstances. TaxBizMantra is not responsible for any decisions taken solely on the basis of this content.

Further Reading

• Old vs New Tax Regime (FY 2025–26): Which Is Better for You?
• Top Tax‑Saving Investments in India (FY 2025–26)

Sources & References

• PIB – Budget 2025 summary: nil tax up to ₹12L; ₹12.75L for salaried; standard deduction ₹75k; special‑rate income excluded.
• CBDT – Budget 2025 FAQs (PDF): 7‑slab grid; standard deduction ₹75,000 (new) / ₹50,000 (old); 87A max ₹60,000; marginal relief example at ₹12.10L; special‑rate income excluded from rebate.
• Income‑tax portal FAQs (New vs Old): Old‑regime basic exemption ₹3L (senior), ₹5L (super‑senior).

Quick FAQs