Income Tax Slabs for AY 2026-27: Old vs New Regime Compared
Latest income tax slabs under both regimes, with worked examples showing which one saves you more.
Income Tax Slabs for AY 2026-27: Old vs New Regime Compared
For Assessment Year (AY) 2026-27, covering income earned in Financial Year (FY) 2025-26, taxpayers in India continue to have the option of choosing between the Old and New Income Tax Regimes. The New Regime, which became the default from AY 2024-25, offers lower tax rates but fewer deductions and exemptions. Understanding the nuances of both is crucial for optimising your tax liability.
What are the income tax slabs under the New Regime for AY 2026-27?
The New Tax Regime for AY 2026-27 maintains the simplified structure introduced, offering lower tax rates across various income brackets but with minimal deductions. This regime is now the default option for taxpayers unless they explicitly choose the Old Regime.
Here are the income tax slabs for individual taxpayers (including Hindu Undivided Families, or HUFs) under the New Tax Regime for AY 2026-27:
| Income Slab (₹) | Tax Rate |
|---|---|
| Up to 3,00,000 | Nil |
| 3,00,001 to 6,00,000 | 5% |
| 6,00,001 to 9,00,000 | 10% |
| 9,00,001 to 12,00,000 | 15% |
| 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
Additionally, a rebate under Section 87A of the Income Tax Act, 1961, is available for individuals with a total taxable income up to ₹7,00,000. This means if your income does not exceed ₹7,00,000, you pay no tax under the New Regime. The rebate amount is the lower of the tax payable or ₹25,000. Standard deduction of ₹50,000 is also available for salaried individuals and pensioners under the New Regime.
What are the income tax slabs and deductions under the Old Regime for AY 2026-27?
The Old Tax Regime for AY 2026-27 continues to offer higher tax rates compared to the New Regime but allows taxpayers to claim a wide array of deductions and exemptions, significantly reducing their taxable income. This regime is often beneficial for those who make substantial investments in tax-saving instruments or have eligible expenses.
The income tax slabs under the Old Tax Regime for AY 2026-27 are categorised based on age:
For Individuals below 60 years of age and HUFs:
| Income Slab (₹) | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
For Senior Citizens (60 years to less than 80 years of age):
| Income Slab (₹) | Tax Rate |
|---|---|
| Up to 3,00,000 | Nil |
| 3,00,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
For Super Senior Citizens (80 years of age and above):
| Income Slab (₹) | Tax Rate |
|---|---|
| Up to 5,00,000 | Nil |
| 5,00,001 to 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Key deductions and exemptions available under the Old Regime include:
- Section 80C: Up to ₹1,50,000 for investments in PPF, EPF, ELSS, life insurance premiums, home loan principal repayment, etc.
- Section 80CCD(1B): Additional deduction of up to ₹50,000 for contributions to NPS.
- Section 80D: Deduction for health insurance premiums (for self, family, and parents).
- Section 24(b): Interest on housing loan for self-occupied property, up to ₹2,00,000.
- Standard Deduction: ₹50,000 for salaried individuals and pensioners.
- House Rent Allowance (HRA): Exemption for rent paid, subject to conditions.
- Leave Travel Allowance (LTA): Exemption for travel expenses, subject to conditions.
- Section 80E: Deduction for interest on education loan.
- Section 80G: Deduction for donations to specified charitable institutions.
A rebate under Section 87A is available for individuals with a total taxable income up to ₹5,00,000, reducing tax payable to nil.
How do I calculate the break-even income between the Old and New Regimes?
Calculating the break-even income involves determining the level of deductions and exemptions at which the tax liability under both regimes becomes approximately equal, helping you decide which regime is more beneficial. This is not a fixed number but depends on your specific income and eligible deductions.
Let's illustrate with an example for a salaried individual below 60 years of age, assuming a standard deduction of ₹50,000 is available in both regimes (for simplicity, we'll factor it into the New Regime's base exemption).
Scenario: A salaried individual with a gross salary of ₹15,00,000.
New Regime Calculation:
- Gross Income: ₹15,00,000
- Standard Deduction: ₹50,000
- Taxable Income: ₹14,50,000
- Tax on ₹14,50,000:
- Up to ₹3,00,000: Nil
- ₹3,00,001 - ₹6,00,000 (₹3,00,000 @ 5%): ₹15,000
- ₹6,00,001 - ₹9,00,000 (₹3,00,000 @ 10%): ₹30,000
- ₹9,00,001 - ₹12,00,000 (₹3,00,000 @ 15%): ₹45,000
- ₹12,00,001 - ₹14,50,000 (₹2,50,000 @ 20%): ₹50,000
- Total Tax: ₹15,000 + ₹30,000 + ₹45,000 + ₹50,000 = ₹140,000
- Add 4% Health & Education Cess: ₹5,600
- Total Tax Liability (New Regime): ₹145,600
Old Regime Calculation (to match New Regime tax): To have a similar tax liability of ₹145,600 under the Old Regime, we need to find the deductions required.
- Gross Income: ₹15,00,000
- Standard Deduction: ₹50,000
- Taxable Income before other deductions: ₹14,50,000
Let's assume the tax on ₹14,50,000 under the Old Regime without any other deductions would be:
- Up to ₹2,50,000: Nil
- ₹2,50,001 - ₹5,00,000 (₹2,50,000 @ 5%): ₹12,500
- ₹5,00,001 - ₹10,00,000 (₹5,00,000 @ 20%): ₹100,000
- ₹10,00,001 - ₹14,50,000 (₹4,50,000 @ 30%): ₹135,000
- Total Tax: ₹12,500 + ₹100,000 + ₹135,000 = ₹247,500
- Add 4% Cess: ₹9,900
- Total Tax Liability (Old Regime, no other deductions): ₹257,400
To reduce the Old Regime tax from ₹257,400 to ₹145,600, the individual needs to save ₹111,800 in tax. Since the highest marginal rate is 30% (for income above ₹10,00,000), a tax saving of ₹111,800 would require deductions of approximately ₹111,800 / 0.30 = ₹3,72,667.
So, if your total eligible deductions (beyond the standard deduction) are around ₹3,72,667 or more, the Old Regime might be more beneficial. If your deductions are significantly less than this, the New Regime could be better. This break-even point changes with income levels and the specific deductions you can claim.
How do the regimes impact salaried professionals, business owners, and pensioners?
The choice between the Old and New Tax Regimes has distinct implications for different taxpayer categories due to their varying income structures and eligibility for deductions.
Salaried Professionals:
- Old Regime: Highly beneficial for those who actively invest in tax-saving instruments (80C, NPS), pay significant home loan interest (24b), have health insurance (80D), or receive HRA/LTA. The standard deduction of ₹50,000 is also available.
- New Regime: Attractive for those who prefer simpler tax compliance, make minimal tax-saving investments, or have limited eligible deductions. The lower tax rates and the ₹50,000 standard deduction (Sec. 16(ia) of Income Tax Act, 1961) make it appealing, especially for incomes up to ₹7,00,000 (due to Section 87A rebate).
Small Business Owners/Professionals:
- Old Regime: Can be advantageous if they have significant business expenses that are deductible under various sections, or if they make personal tax-saving investments. They might not have access to HRA/LTA but can benefit from other deductions.
- New Regime: Can be simpler for those with fewer business deductions or who prefer not to track numerous personal investment proofs. The lower slab rates can be beneficial if their taxable income is high and they don't have substantial personal tax-saving investments. Business owners and professionals with income from business or profession who opt for the New Regime cannot switch back to the Old Regime in subsequent years, except once in their lifetime.
Pensioners:
- Old Regime: Often beneficial due to the standard deduction of ₹50,000 on pension income (Sec. 16(ia)), deductions for health insurance premiums (80D), and potentially higher basic exemption limits for senior and super senior citizens.
- New Regime: Can be attractive if their pension income is relatively low (up to ₹7,00,000 for nil tax) and they have minimal other deductions. The standard deduction is also available here. For super senior citizens, the higher basic exemption limit in the Old Regime (₹5,00,000) might still make it more favourable than the New Regime's uniform ₹3,00,000 basic exemption.
The decision ultimately hinges on a detailed comparison of tax liability under both regimes, considering all eligible deductions and exemptions specific to the individual's financial situation.
How do I switch between the Old and New Tax Regimes when filing my ITR?
Switching between the Old and New Tax Regimes when filing your Income Tax Return (ITR) depends on whether you have income from business or profession.
For individuals NOT having income from business or profession (e.g., salaried employees, pensioners, those with rental income, capital gains): You can choose between the Old and New Regimes every year when filing your ITR. There is no restriction on switching back and forth. You simply select your preferred regime in the ITR form itself. For instance, in ITR-1 or ITR-2, there will be an option to indicate whether you are opting for the New Tax Regime under Section 115BAC of the Income Tax Act, 1961. If you select 'Yes', the New Regime provisions apply; if 'No', the Old Regime applies.
For individuals HAVING income from business or profession: The rules are stricter for this category.
- Initial Choice: If you opt for the New Tax Regime, you must do so by filing Form 10-IE on or before the due date for filing your ITR for that assessment year. Once you opt in, you are bound by the New Regime for subsequent assessment years.
- One-Time Switch Back: You are allowed to switch back to the Old Tax Regime only once in your lifetime. If you choose to revert to the Old Regime, you must again file Form 10-IE to withdraw your option for the New Regime.
- Subsequent Re-entry: After switching back to the Old Regime, you cannot opt for the New Regime again in any future assessment year, unless you meet specific conditions or the law changes.
- Failure to File Form 10-IE: If you have business income and wish to opt for the New Regime but fail to file Form 10-IE, your income will automatically be taxed under the Old Regime.
Therefore, for business income earners, the decision to opt for or switch out of the New Regime is a significant one and requires careful consideration and timely filing of Form 10-IE.
How SP & SC helps
Navigating the complexities of income tax slabs, deductions, and regime choices can be daunting. At SP & SC Legal and Taxation Services, our experts provide tailored advice and comprehensive support for income tax filing, ensuring you choose the most beneficial regime and comply with all statutory requirements. Visit our services page at /services/compliance/income-tax-filing to learn how we can simplify your tax journey and optimise your financial outcomes.
Frequently asked questions
What is the basic exemption limit under the New Tax Regime for AY 2026-27?
The basic exemption limit under the New Tax Regime for AY 2026-27 is ₹3,00,000 for all individual taxpayers, irrespective of age. This is a uniform limit, unlike the Old Regime which has different limits for senior and super senior citizens.
Can I claim HRA and LTA exemptions under the New Tax Regime?
No, House Rent Allowance (HRA) and Leave Travel Allowance (LTA) exemptions, along with most other common exemptions and deductions like those under Section 80C, 80D, and Section 24(b) for home loan interest, are not available under the New Tax Regime. The New Regime offers lower tax rates in exchange for foregoing these benefits.
Is the standard deduction of ₹50,000 available in both regimes for salaried individuals?
Yes, the standard deduction of ₹50,000 for salaried individuals and pensioners is available under both the Old Tax Regime and the New Tax Regime from AY 2024-25 onwards. This was a significant change that made the New Regime more attractive for many.
What is the surcharge rate for high-income earners under both regimes?
The surcharge rates remain the same for both regimes:
- 10% of income tax if total income exceeds ₹50 lakh but up to ₹1 crore.
- 15% of income tax if total income exceeds ₹1 crore but up to ₹2 crore.
- 25% of income tax if total income exceeds ₹2 crore but up to ₹5 crore (for Old Regime, this is capped at 15% for certain incomes like capital gains).
- 37% of income tax if total income exceeds ₹5 crore (for Old Regime, this is capped at 15% for certain incomes like capital gains). However, under the New Regime, the highest surcharge rate of 37% has been reduced to 25% for income exceeding ₹5 crore, making it more appealing for very high-income earners.
If I switch to the New Regime, can I still claim deductions for investments made in PPF or ELSS?
No, if you opt for the New Tax Regime, you cannot claim deductions for investments made in instruments like Public Provident Fund (PPF) or Equity Linked Savings Schemes (ELSS) under Section 80C. These deductions are only available under the Old Tax Regime.
How does the Section 87A rebate work in the New Regime for AY 2026-27?
Under the New Tax Regime for AY 2026-27, if your total taxable income does not exceed ₹7,00,000, you are eligible for a full tax rebate under Section 87A. This means your tax liability will be zero. The rebate amount is the lower of the actual tax payable or ₹25,000. For example, if your tax payable is ₹20,000, the full ₹20,000 is rebated. If your tax payable is ₹30,000, only ₹25,000 is rebated, and you pay the remaining tax.