Budget 2026 did not change the income tax slabs, so the rates that applied in FY 2025-26 continue for FY 2026-27. What has changed is the law around them: the Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, and the old "previous year" and "assessment year" pair is now simply the "tax year". The numbers below apply to individuals.
New tax regime slabs (the default)
- Up to ₹4,00,000: nil
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- ₹12,00,001 to ₹16,00,000: 15%
- ₹16,00,001 to ₹20,00,000: 20%
- ₹20,00,001 to ₹24,00,000: 25%
- Above ₹24,00,000: 30%
Salaried individuals and pensioners get a standard deduction of ₹75,000. A rebate of up to ₹60,000 means no tax is payable if taxable income is up to ₹12 lakh, which makes income up to ₹12.75 lakh tax-free for a salaried person. The rebate does not apply to income taxed at special rates, such as certain capital gains, and marginal relief softens the jump for incomes just above ₹12 lakh. Health and education cess of 4% is added on the tax, and surcharge applies above ₹50 lakh, capped at 25% in this regime.
Old tax regime slabs
Below age 60: nil up to ₹2.5 lakh, 5% from ₹2.5 lakh to ₹5 lakh, 20% from ₹5 lakh to ₹10 lakh, and 30% above ₹10 lakh.
Senior citizens (60 to under 80): nil up to ₹3 lakh, 5% from ₹3 lakh to ₹5 lakh, 20% from ₹5 lakh to ₹10 lakh, and 30% above ₹10 lakh.
Super senior citizens (80 and above): nil up to ₹5 lakh, 20% from ₹5 lakh to ₹10 lakh, and 30% above ₹10 lakh.
The old regime has a standard deduction of ₹50,000 for salaried individuals and a rebate of up to ₹12,500 if taxable income is ₹5 lakh or less. Its advantage is that you can claim deductions and exemptions such as 80C (now Section 123), 80D, HRA and home loan interest.
Which regime applies to me?
The new regime is the default. A salaried individual can choose the old regime each year by informing the employer and by selecting it while filing the return. Individuals with business or professional income have limited rights to switch back and forth (Form 10-IEA), so decide carefully.
Worked examples (salaried, new regime)
Salary ₹12.75 lakh: after the ₹75,000 standard deduction, taxable income is ₹12 lakh. The rebate wipes out the tax, so you pay nothing.
Salary ₹15 lakh: taxable income is ₹14.25 lakh. Tax is ₹20,000 (on 4 to 8 lakh) + ₹40,000 (on 8 to 12 lakh) + ₹33,750 (15% on ₹2.25 lakh) = ₹93,750. With 4% cess the total is ₹97,500.
Salary ₹25 lakh: taxable income is ₹24.25 lakh. Tax is ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000 + ₹7,500 (30% on ₹25,000) = ₹3,07,500. With cess the total is ₹3,19,800.
Old vs new: a quick comparison
Take a salary of ₹15 lakh with these old-regime claims: standard deduction ₹50,000, Section 80C ₹1.5 lakh, health insurance ₹25,000, home loan interest ₹2 lakh and NPS ₹50,000. That is ₹4.75 lakh of deductions and a taxable income of ₹10.25 lakh. Old-regime tax is ₹12,500 + ₹1,00,000 + ₹7,500 = ₹1,20,000, or ₹1,24,800 with cess. The new regime costs ₹97,500, so it is still cheaper even with ₹4.75 lakh of deductions. The old regime starts to win only when your genuine deductions are larger than that, so run the numbers for your own situation instead of assuming.
Things worth remembering
- The new regime does not allow 80C, 80D, HRA, LTA or home loan interest on a self-occupied property, but employer contributions to NPS remain deductible.
- Choosing a regime is a yearly decision for salaried individuals, so revisit it when your salary or investments change.
- Capital gains, dividends and other special-rate incomes are taxed at their own rates in both regimes.
Need help choosing?
We compare both regimes for you before the return is filed. See our income tax return filing and tax planning services, or talk to us.
Last reviewed October 2026. This article is general information, not advice for your specific case. Confirm with a chartered accountant before acting.