India's Income Tax Slabs for FY 2026-27 at a Glance
The Union Budget presented on 1 February 2026 made no changes to income tax slabs. The rates introduced for FY 2025-26 continue for FY 2026-27 (1 April 2026 to 31 March 2027).
New Tax Regime (default)
| Taxable income | Tax rate |
|---|---|
| Up to Rs. 4,00,000 | Nil |
| Rs. 4,00,001 - 8,00,000 | 5% |
| Rs. 8,00,001 - 12,00,000 | 10% |
| Rs. 12,00,001 - 16,00,000 | 15% |
| Rs. 16,00,001 - 20,00,000 | 20% |
| Rs. 20,00,001 - 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
- Standard deduction for salaried employees: Rs. 75,000
- Rebate: up to Rs. 60,000 for residents with taxable income up to Rs. 12 lakh
- Cess: 4% on the tax amount
Old Tax Regime (optional, for individuals below 60)
| Taxable income | Tax rate |
|---|---|
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 - 5,00,000 | 5% |
| Rs. 5,00,001 - 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
- Standard deduction: Rs. 50,000
- Rebate: up to Rs. 12,500 for taxable income up to Rs. 5 lakh
- Deductions and exemptions such as tax-saving investments, health insurance premiums, HRA, and home loan interest are available
Why Salary up to Rs. 12.75 Lakh Is Tax-Free
Under the new regime:
- Salary: Rs. 12,75,000
- Less standard deduction: Rs. 75,000
- Taxable income: Rs. 12,00,000
- Tax on slabs: Rs. 20,000 + Rs. 40,000 = Rs. 60,000
- Less rebate: Rs. 60,000
- Tax payable: nil
If your income is slightly above Rs. 12 lakh after the standard deduction, marginal relief limits your tax so that it does not exceed the amount by which your income crosses Rs. 12 lakh.
Worked Example: Salary of Rs. 15 Lakh
New regime
- Salary: Rs. 15,00,000
- Standard deduction: Rs. 75,000
- Taxable income: Rs. 14,25,000
| Slab | Tax |
|---|---|
| First Rs. 4 lakh | 0 |
| Rs. 4-8 lakh at 5% | 20,000 |
| Rs. 8-12 lakh at 10% | 40,000 |
| Rs. 12-14.25 lakh at 15% | 33,750 |
| Total | 93,750 |
| Cess at 4% | 3,750 |
| Tax for the year | 97,500 |
Monthly TDS: about Rs. 8,125
Old regime, with common deductions
Assume Rs. 1.5 lakh of tax-saving investments, Rs. 25,000 of health insurance premiums, and Rs. 2 lakh of HRA exemption.
- Salary: Rs. 15,00,000
- Less standard deduction, investments, insurance, HRA: Rs. 4,25,000
- Taxable income: Rs. 10,75,000
- Tax: Rs. 12,500 + Rs. 1,00,000 + Rs. 22,500 = Rs. 1,35,000
- Cess at 4%: Rs. 5,400
- Tax for the year: Rs. 1,40,400
Even with Rs. 4.25 lakh of deductions, the old regime costs about Rs. 43,000 more in this example. The old regime tends to win only when deductions are considerably larger, for example a high rent and a home loan together.
How TDS on Salary Works
Your employer does not wait until the end of the year. Each month, payroll:
- Estimates your salary for the full year, including expected bonuses
- Applies the regime you declared (the new regime if you declared nothing)
- Subtracts the standard deduction and any eligible deductions
- Calculates annual tax and cess
- Divides the balance by the months remaining
That is why TDS can change mid-year when you get an increment, a bonus, or submit investment proofs. The TDS line on your payslip is explained in how to read a salary slip.
What Changed With the Income-tax Act, 2025
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. It rewrites and renumbers the law without changing the slabs.
- Tax year: The terms "previous year" and "assessment year" are replaced by a single "tax year". Tax year 2026-27 runs from 1 April 2026 to 31 March 2027.
- New section numbers: TDS on salary moves from Section 192 to Section 392. Familiar deductions keep working but carry new section numbers.
- Form 130 replaces Form 16: For salary paid from tax year 2026-27, your employer will issue Form 130. The certificate you received in June 2026 for FY 2025-26 was still Form 16.
- Old regime stays: Both regimes continue under the new Act.
Choosing Your Regime: A Quick Checklist
Choose the new regime if:
- Your salary is up to Rs. 12.75 lakh (no tax at all)
- You do not pay rent or have a home loan
- Your total deductions are modest
Consider the old regime if:
- You pay high rent and receive HRA
- You pay significant home loan interest
- You fully use tax-saving investments and health insurance deductions
Salaried employees can switch regimes each year. Tell your employer at the start of the year so the right TDS is deducted, and you can still make the final choice when filing your return.
How Tax Affects Your Take-Home Pay
Income tax is only one of the deductions between gross and net pay. Provident fund, professional tax, and ESI are covered in our payroll deductions guide, and CTC vs in-hand salary shows the full calculation.
To see your own numbers on a payslip, enter your earnings and deductions in our free salary slip generator.
Conclusion
For FY 2026-27 the slabs are unchanged: the new regime is the default, salary up to Rs. 12.75 lakh is tax-free, and the top rate of 30% starts above Rs. 24 lakh. What is new is the law around it — the Income-tax Act 2025, the "tax year", and Form 130.
This article is general information, not tax advice. Surcharge applies to incomes above Rs. 50 lakh, and individual circumstances differ — consult a tax professional for your situation.