A Complete Guide of New Regime Tax Slab for Tax Year 2026-27

Q: What is the Income Tax Act, 2025, and does it change how much tax I pay?

The Income Tax Act, 2025 replaced the Income Tax Act, 1961 from 1 April 2026. It reorganises and simplifies the income-tax law and introduces new terminology and section numbers.

4 min 08 May 2024

Highlights:

Current Income Tax Slab
Understanding the Old and New Tax Regime

For Tax Year 2026-27, the new tax regime continues to be the default tax regime for individual taxpayers. Income of up to Rs.4 Lakh falls within the nil tax slab, after which tax rates progressively increase from 5% to 30%, with the highest rate applying to income above Rs.24 Lakh.

Resident individuals with total income of up to Rs.12 Lakh may also qualify for a tax rebate that can reduce their tax liability on income taxable at the normal slab rates to nil. This guide explains the current new-regime income tax slabs for Tax Year 2026-27, the applicable rebate, and how the new regime compares with the old tax regime.

Current Income Tax Slabs Tax Year 2026-27

Before we understand the revised income tax slab, let us run you through the highlights of this year’s Union Budget. The basic exemption limit under the new income tax slab is Rs.4 Lakh. In addition to revising income tax rates, the proposed increase in the Section 157 tax rebate to Rs.60,000 will ensure that individuals with incomes up to Rs.12 Lakh have no tax liability.

Taxpayers must also know that as per the current income tax regime, slabs vary depending on the age of the borrower. However, this would not be the case with the new tax regime. Read on to learn more about the old income tax slabs.

Old Tax Regime: Income Tax Slabs

Under the old tax regime, taxpayers were exempt from paying any tax on any income up to Rs.2.5 Lakh. The tax one had to pay on income above Rs.2.5 Lakh has been mentioned in the table below:

Income (Rs.)	Tax Rate
0-2.5 Lakh	NIL
2.5 Lakh to 5 Lakh	5%
5 Lakh to 7.5 Lakh	20%
7.5 Lakh to 10 Lakh	20%
10 Lakh to 12.5 Lakh	30%
12.5 Lakh to 15 Lakh	30%
Above 15 Lakh	30%

New Tax Regime: Income Tax Slabs

Under the new tax regime, taxpayers are required to pay no taxes on income up to Rs.4 Lakh. Let us now look at the revised income tax slabs under the new tax exemption limit.

Income	Tax Rate
Up to Rs.4 Lakh	NIL
Rs.4 Lakh to Rs.8 Lakh	5%
Rs.8 Lakh to Rs.12 Lakh	10%
Rs.12 Lakh to Rs.16 Lakh	15%
Rs.16 Lakh to Rs.20 Lakh	20%
Rs.20 Lakh to Rs.24 Lakh	25%
Above Rs.24 Lakh	30%

Section 156 Rebate Under the New Tax Regime

Under the new tax regime, a resident individual with total income of up to Rs.12 Lakh can claim a rebate under Section 156 of the Income Tax Act, 2025. The rebate is equal to 100% of the income tax payable or Rs.60,000, whichever is lower. As a result, eligible taxpayers with total income of up to Rs.12 Lakh can have no tax liability on income taxed at the normal slab rates.

For salaried individuals, the new tax regime also provides a standard deduction of up to Rs.75,000. Therefore, a salaried taxpayer earning up to Rs.12.75 Lakh may effectively have taxable income of Rs.12 Lakh after the standard deduction and may qualify for the Section 156 rebate.

Section 156 also provides marginal relief when total income exceeds Rs.12 Lakh by a small amount. This helps ensure that the additional tax payable does not disproportionately exceed the amount by which the taxpayer’s income crosses the Rs.12 Lakh threshold.

Now, whether you are filing taxes under the old regime or the new regime, these are a few things that you must keep in your mind:

Income Tax Laws state that salaried individuals can change their tax regime as per their convenience. In simpler words, a salaried individual can pay their taxes as per the new tax regime or old tax regime, i.e. whichever seems more beneficial to them in that financial year. However, when it comes to self-employed individuals or businessmen, the taxpayer can switch regimes only once in their life.
Taxpayers must also know that unlike in the past and as opposed to old tax regimes, the new tax regime does not differentiate based on age. In the old tax regime, the basic exemption limit was Rs.2.5 Lakh for taxpayers under the age of 60. However, for taxpayers between the age of 60 and 80, this basic exemption limit was Rs.3 Lakh. However, as per the new tax regime, there is only one basic tax exemption limit, which is applicable to taxpayers of all ages and this is no tax on income up to Rs.3 Lakh.
The government has proposed that it will revise the surcharge applicable. If your taxable income is up to Rs.50 Lakh, the surcharge will be 10%; if the taxable income goes beyond Rs.1 Crore, you will be charged a surcharge fee at 15% and if the taxable income is above Rs.2 Crore, the surcharge will be 25%.
If you are considering getting a Home Loan, it's important to understand the implications of the new tax regime exemption. While it offers lower tax rates, it also eliminates several deductions that were previously available under the old tax regime. For instance, deductions on long-term savings, health insurance like PPF, house rent allowance, and home loans are no longer permitted.

Whether you are filing taxes under the old regime or the new regime, here are a few things that you must keep in mind:

Income tax regulations allow salaried individuals to switch between the new and old tax regimes based on their preference for each financial year. This means they can choose the regime that offers the most benefit to them in a given year. On the other hand, self-employed individuals or business owners can switch between the tax regimes only once during their lifetime.
Taxpayers must also know that, as opposed to old tax regimes, the new tax regime does not differentiate based on age. In the old tax regime, the basic exemption limit was Rs.2.5 Lakh for taxpayers under the age of 60 and Rs.3 Lakh for those between the ages of 60 and 80. Under the new tax regime, a single basic exemption limit applies to taxpayers of all age groups, with no tax levied on income up to Rs.3 Lakh.
The government has proposed that it will revise the surcharge applicable. The surcharge rates for individuals, HUF, AOP, BOI, and artificial judicial persons are based on the taxable income bracket. Under the new tax regime, taxpayers with an income less than Rs.50 Lakh have to pay no surcharge. For incomes between Rs.50 Lakh and Rs.1 Crore, a 10% surcharge is applied. This surcharge increases to 15% for incomes between Rs.1 Crore and Rs.2 Crore, and further to 25% for incomes between Rs.2 Crore and Rs.5 Crore. However, for incomes exceeding Rs.5 Crore, the surcharge under the old tax regime is 37%, while under the new tax regime, it is capped at 25%.
If you are considering availing of a Home Loan, it is important to understand the implications of the new tax regime exemption. While it offers lower tax rates, it also eliminates several deductions that were previously available under the old tax regime. For instance, deductions on long-term savings, health insurance, such as PPF, house rent allowances, and Home Loans are no longer permitted.

Income Tax Act, 2025 – What Taxpayers Need to Know

The Income-tax Act, 2025 came into effect on 1 April 2026. For individual taxpayers, the transition primarily affects the terminology and section numbers used under the tax law rather than requiring a separate tax-filing process.

What taxpayers should know	What it means
Income earned up to 31 March 2026 follows the old Act	Income earned during FY 2025-26 is filed for Assessment Year 2026-27 under the Income-tax Act, 1961, even if the return is filed after 1 April 2026.
Income from 1 April 2026 follows the new Act	Income earned from 1 April 2026 onwards is governed by the Income-tax Act, 2025 and is referred to by its Tax Year. For example, income earned between 1 April 2026 and 31 March 2027 falls under Tax Year 2026-27.
You do not need to file two returns for the same income	During the transition, taxpayers should select the relevant Assessment Year or Tax Year based on the period in which the income was earned.
Some familiar section numbers have changed	Several provisions continue under the new Act but have been assigned new section numbers. For example, the individual income-tax rebate earlier associated with Section 87A is covered under Section 156 of the Income-tax Act, 2025.
The rebate under the new tax regime continues	Under Section 156, an eligible resident individual with total income of up to Rs.12 Lakh under the new tax regime can receive a rebate of up to Rs.60,000, subject to the tax being payable at the normal slab rates.
The e-filing portal supports both tax frameworks	During the transition, taxpayers can select the applicable Assessment Year for filings under the old Act or Tax Year for filings under the new Act.

Home Loan Tax Benefits – Recodified Section Names under the Income Tax Act,2025

Income Tax Act, 1961	Income Tax Act, 2025	Tax benefit/deduction
Section 24 – Deductions from Income from House Property	Section 22 – Deductions from Income from House Property	Home Loan interest deduction of up to Rs.2 Lakh per year for a self-occupied property, where the applicable conditions are met. The official section mapping confirms that Section 24 under the 1961 Act corresponds to Section 22 under the 2025 Act.
Section 80C	Section 123	Deduction of up to Rs.1.5 Lakh per year, which can include eligible Home Loan principal repayment. Eligible stamp duty and registration charges also fall within this overall limit.
Section 80EE	Section 130	Additional deduction of up to Rs.50,000 on Home Loan interest for eligible first-time homebuyers whose loans meet the specified sanction-date, loan-value and property-value conditions.
Section 80EEA	Section 131	Additional deduction of up to Rs.1.5 Lakh on Home Loan interest for eligible first-time buyers of affordable homes. The loan must have been sanctioned during the specified period, and the applicable property-value conditions must be met.

Final Words

In conclusion, the new tax regime and new tax exemption limits introduced in 2025 have brought about significant changes to the way individuals are taxed. If you are servicing a Home Loan, you can calculate the tax benefits using our Income Tax Calculator. By accurately assessing your tax liability, you can make informed decisions and strategise ways to save on taxes.

FAQs

No, Budget 2026 did not change the individual income tax slab rates for Tax Year 2026-27. Under the new tax regime, income up to Rs.4 Lakh falls in the nil slab.

For an eligible resident individual, tax on total income of up to Rs.12 Lakh can be reduced to nil through the rebate available under Section 156, provided the income is taxable at the normal new-regime slab rates. The rebate is 100% of the tax payable or Rs.60,000, whichever is lower. Income taxable at special rates may not receive the same rebate benefit.

For salaried taxpayers, the applicable standard deduction can further reduce taxable income, meaning a salary of up to Rs.12.75 Lakh may result in nil tax where the relevant conditions are met.

No, the new tax regime does not provide separate higher basic exemption limits based on age. The same slab rates under Section 202 apply to individual taxpayers, including senior and super senior citizens.

No, the rebate under Section 156 is specifically available to an individual resident in India. Therefore, a non-resident individual cannot claim this rebate.

The Income Tax Act, 2025, replaced the Income Tax Act, 1961, from 1 April 2026. It reorganises and simplifies the income-tax law and introduces new terminology and section numbers.

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