Income Tax Slabs 2026-27: Old vs New Regime Compared

Understanding the Income Tax Slabs 2026-27 is essential if you’re a salaried employee trying to figure out how much tax you’ll actually pay this year. Every year around budget season, the same question pops up in every office WhatsApp group: “Old regime lena chahiye ya new?” And honestly, the confusion is understandable — the two systems work quite differently.

Here’s the good news first: Budget 2026 hasn’t changed the income tax slabs. The rates and structure that applied in FY 2025-26 continue as-is for FY 2026-27 (AY 2027-28). So if you already understood last year’s slabs, you’re mostly set. But if you’re still unsure how the old and new regimes compare, or which one actually saves you more money, this guide breaks it all down in plain language.

What Is an Income Tax Slab?

An income tax slab is simply a range of income that gets taxed at a specific rate. Instead of taxing your entire salary at one flat rate, India follows a progressive system — meaning the more you earn, the higher the rate on the portion of income that falls into higher brackets. Your first few lakhs are either tax-free or taxed lightly, and only the income above certain thresholds gets taxed at steeper rates.

Currently, taxpayers can choose between two systems: the new tax regime (which is now the default) and the old tax regime (which you can still opt for if it suits you better).

New Tax Regime Slabs for FY 2026-27 (AY 2027-28)

The new regime has become the government’s preferred structure because it’s simpler — fewer deductions to track, but generally lower rates. Here’s how the slabs look:

Here’s a complete breakdown of the Income Tax Slabs 2026-27 under the new regime:

Salaried employees also get a standard deduction of ₹75,000 under this regime, which effectively pushes the tax-free threshold higher than it looks on paper. We’ll get into exactly how that works in a moment.

Old Tax Regime Slabs for FY 2026-27 (AY 2027-28)

The old regime sticks with its familiar structure, and it remains attractive for people who invest heavily in tax-saving instruments or pay a home loan.

For Individuals Below 60 Years

For Senior Citizens (60–80 Years)

Exemption limit rises to ₹3,00,000, with the same rate structure applying above that.

For Super Senior Citizens (Above 80 Years)

Exemption limit further increases to ₹5,00,000.

Income Tax Slabs 2026-27: Old vs New Regime Comparison

Rather than jumping between two separate tables in your head, here’s a direct comparison to make the decision easier.

Rebate Under Section 87A: How It Reduces Your Tax to Zero

This is where things get genuinely interesting, and it’s also the part most people misunderstand. The rebate under Section 87A doesn’t change your tax slab — instead, it wipes out your entire tax liability if your taxable income falls within a certain limit.

Under the new regime, if your taxable income is up to ₹12,00,000, you get a rebate of up to ₹60,000, which brings your tax to nil. Under the old regime, the rebate caps out at ₹5,00,000 taxable income, with a maximum rebate of ₹12,500.

Marginal Relief Under the New Regime

Here’s a subtle but useful provision. Suppose your income crosses ₹12,00,000 by a small margin, say ₹12,10,000. Without marginal relief, you’d suddenly owe tax on the full amount above ₹4 lakh, which could leave you worse off than someone earning slightly less. Marginal relief steps in to ensure your tax doesn’t exceed the amount by which your income exceeds ₹12,00,000. In simple terms, it smooths out the cliff-edge effect so a tiny raise doesn’t cost you disproportionately.

Standard Deduction Explained

Every salaried individual and pensioner automatically gets to subtract the standard deduction from their gross salary before tax is calculated — no bills, no proof, no paperwork required. It’s ₹75,000 under the new regime and ₹50,000 under the old regime. This single deduction is one of the easiest ways the tax system reduces your burden without you lifting a finger.

How Rebate and Standard Deduction Make Salary Tax-Free Up to ₹12.75 Lakh

Combine the standard deduction with the Section 87A rebate, and something interesting happens for salaried employees under the new regime: effective tax-free income rises to ₹12,75,000, not just ₹12,00,000.

Here’s the logic:

• Gross salary: ₹12,75,000
• Less standard deduction: ₹75,000
• Taxable income: ₹12,00,000
• Since taxable income is exactly at the ₹12,00,000 rebate threshold, tax liability becomes nil after rebate

This is genuinely one of the more taxpayer-friendly changes in recent years, and it’s worth knowing if you’re evaluating a job offer or planning your CTC structure. If you’re comparing offers, it also helps to understand what CTC actually means versus your real take-home pay.

Surcharge and Health & Education Cess

For higher earners, surcharge kicks in on top of the basic tax:

A 4% Health & Education Cess applies on the tax plus surcharge, under both regimes. Marginal relief also applies at each surcharge threshold, so crossing ₹50 lakh by a small amount won’t disproportionately spike your tax.

Income Tax Calculation Examples

Numbers make more sense with real examples, so let’s walk through two.

Example 1: Salary of ₹12,00,000 (New Regime)

After the ₹75,000 standard deduction, taxable income becomes ₹11,25,000. Tax works out to roughly ₹60,000 before rebate. Since taxable income is within the ₹12,00,000 rebate threshold, the Section 87A rebate brings the final tax liability down to zero.

Example 2: Salary of ₹15,00,000 (Old vs New Regime)

Under the new regime, after the standard deduction, taxable income is ₹14,25,000. Tax is calculated slab-wise and comes to approximately ₹1,27,500 plus cess.

Under the old regime, assuming deductions of ₹2,00,000 (80C + home loan interest + HRA combined), taxable income drops to roughly ₹12,50,000. Tax works out to around ₹1,95,000 plus cess.

In this case, the new regime turns out cheaper — but if this person had more deductions available (say, ₹3.5–4 lakh worth), the old regime could easily flip to being the better option. This is exactly why a blanket recommendation doesn’t work; your own numbers matter.

Deductions Available: Old vs New Regime

One of the biggest trade-offs when picking a regime is what you give up in exchange for lower rates.

Which Regime Should Salaried Employees Choose?

There’s no one-size-fits-all answer, but here’s a practical way to think about it:

• Choose the old regime if: You claim substantial deductions — an active home loan, HRA due to rented accommodation, heavy 80C investments, or health insurance premiums that together exceed roughly ₹3.5–4 lakh.
• Choose the new regime if: You have minimal deductions, prefer simpler compliance, or your investments are already tax-efficient outside of 80C-eligible instruments.
• When in doubt: Run both calculations before filing. A five-minute comparison can save you real money.

If you’re also reviewing other parts of your compensation, it’s worth checking how components on your salary slip affect what counts as taxable versus exempt income.

How to Choose or Switch Regime While Filing ITR

The new regime is the default option — meaning if you don’t actively choose otherwise, your employer will deduct TDS under the new regime.

• Salaried individuals (non-business income): You can switch between old and new regime every single year, simply by selecting your preference at the time of filing your ITR.
• Individuals with business or professional income: You’ll need to file Form 10-IEA to opt out of the default new regime. Switching back to the new regime later is allowed only once in a lifetime for this category.

If you’re unsure how this interacts with your monthly TDS deductions, it’s a good idea to first understand the difference between gross and net salary, then double-check your regime choice with payroll or HR before the financial year closes, since it affects how TDS gets deducted throughout the year.

Frequently Asked Questions

Up to what income is tax zero under the new regime?

Salaried individuals pay no tax on income up to ₹12,75,000, thanks to the ₹75,000 standard deduction combined with the Section 87A rebate.

What deductions are available under the old regime?

The old regime allows HRA, LTA, Section 80C (up to ₹1,50,000), home loan interest under Section 24(b), and Section 80D medical insurance premiums, among others.

Can I switch tax regimes every year?

Yes, if you're a salaried individual without business income, you can choose your preferred regime freshly each year while filing your ITR.

Is the standard deduction available in both regimes?

Yes, though the amount differs — ₹75,000 under the new regime and ₹50,000 under the old regime.

Which regime is better for senior citizens?

It depends on their deduction profile. Senior citizens with substantial medical expenses, insurance premiums, or investment-linked deductions often still benefit from the old regime, despite its lower basic exemption limit compared to the new regime.

Is Section 80C allowed under the new tax regime?

No, Section 80C deductions are exclusive to the old regime. The new regime compensates with lower slab rates instead.

Conclusion

Now that you have a clear picture of the Income Tax Slabs 2026-27 under both regimes, choosing between old and new isn’t about which system is objectively “better” — it’s about which one aligns with your financial habits. If you’re someone who actively invests in tax-saving instruments and has a home loan running, the old regime likely still works in your favor. If you’d rather keep things simple and skip the paperwork trail, the new regime’s lower rates and generous rebate make it an easy pick. Either way, running the actual numbers for your income before filing is the only way to be sure — and now that you know exactly how both regimes work for FY 2026-27, that comparison should take you just a few minutes.

For official and updated tax provisions, you can also refer to the Income Tax Department’s official website.