Quick answer: For FY 2026-27 (AY 2027-28), the new tax regime has 7 slabs — nil up to ₹4 lakh, rising to 30% above ₹24 lakh. A rebate of ₹60,000 (Section 156 of the Income-tax Act, 2025) makes taxable income up to ₹12 lakh tax-free, and salaried earners pay zero tax on gross salary up to ₹12.75 lakh because of the ₹75,000 standard deduction. The new regime is the default choice.
New tax regime slabs for FY 2026-27 (AY 2027-28)
| Taxable income (₹) | Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
| Health & Education Cess | 4% on the tax payable |
The same rates apply to everyone — there is no separate slab for senior citizens in the new regime.
Is ₹12 lakh income really tax-free in the new regime?
Yes — if it is normal income like salary or business profit. Here is how the maths works.
Example 1 — Taxable income of ₹12,00,000
| Slab | Income in slab | Rate | Tax |
|---|---|---|---|
| 0 – 4,00,000 | 4,00,000 | 0% | 0 |
| 4,00,001 – 8,00,000 | 4,00,000 | 5% | 20,000 |
| 8,00,001 – 12,00,000 | 4,00,000 | 10% | 40,000 |
| Total tax | 60,000 |
Tax on ₹12 lakh comes to ₹60,000. The Section 156 rebate is also ₹60,000, and it wipes out the entire liability (including the 4% cess). Net payable: zero.
Example 2 — Salary of ₹10,00,000 (no other income)
- Standard deduction: ₹75,000
- Taxable income: 10,00,000 − 75,000 = ₹9,25,000
Tax on ₹9,25,000: 4,00,000 at 0% + 4,00,000 at 5% (₹20,000) + 1,25,000 at 10% (₹12,500) = ₹32,500. Taxable income is below ₹12 lakh, so the ₹60,000 rebate brings the payable amount to zero.
This is why salaried taxpayers with gross income up to ₹12.75 lakh (₹12,75,000 − ₹75,000 = ₹12,00,000 taxable) pay no tax under the new regime.
One important catch: the rebate works only on normal income. If your ₹12 lakh includes capital gains (taxed at special flat rates), the gains are taxed separately and the rebate does not cover them.
Worked tax calculations above ₹12 lakh
Important: the Section 156 rebate is available only when total taxable income is ₹12 lakh or less. Above ₹12 lakh, there is no rebate — you pay the full slab-based tax plus 4% cess.
Example — Taxable income ₹15,00,000
| Slab | Income in slab | Rate | Tax |
|---|---|---|---|
| 0 – 4,00,000 | 4,00,000 | 0% | 0 |
| 4,00,001 – 8,00,000 | 4,00,000 | 5% | 20,000 |
| 8,00,001 – 12,00,000 | 4,00,000 | 10% | 40,000 |
| 12,00,001 – 15,00,000 | 3,00,000 | 15% | 45,000 |
| Total tax | 1,05,000 |
Cess = 4% of ₹1,05,000 = ₹4,200. Total payable = ₹1,09,200 (no rebate, since income exceeds ₹12 lakh).
Example — Taxable income ₹20,00,000
Tax = ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 = ₹2,00,000. Cess = ₹8,000. Total payable = ₹2,08,000.
What changed with the Income-tax Act, 2025
The Income-tax Act, 2025 applies to income earned from 1 April 2026 (FY 2026-27). The numbers are the same as the Budget 2025 structure — only the legal references shifted:
| Item | Old reference | New reference (2025 Act) |
|---|---|---|
| New tax regime | Section 115BAC | Section 202 |
| Low-income rebate (₹60,000) | Section 87A | Section 156 |
| Standard deduction (salaried) | ₹50,000 | ₹75,000 |
| Age-based nil-tax slabs (2.5L / 3L / 5L) | Applied in old regime | Not in new regime — same slabs for all ages |
| Maximum surcharge | 37% (income > ₹5 crore) | 25% in new regime (37% remains in old regime) |
| 80C, 80D, HRA, home-loan interest | Allowed in old regime | Not allowed in new regime (except employer NPS contribution up to 14% of basic salary) |
Two small wording changes to know: “previous year” is now called the tax year, and the separate “assessment year” concept is gone — your return for FY 2026-27 is filed for the tax year 2026-27.
Old vs new regime — when should you pick the old one?
The new regime gives up most deductions: 80C (PPF, ELSS, life insurance), 80D (health insurance), HRA, and home-loan interest on a self-occupied house. It keeps only the employer’s NPS contribution (up to 14% of basic salary) as a deduction.
A practical rule of thumb:
- If your total old-regime deductions (80C + 80D + HRA + home-loan interest + NPS) are below ₹3 lakh, the new regime almost certainly gives you a lower bill.
- If they are above ₹4 lakh, calculate both regimes — the old one can still win.
For example, a salaried person with ₹1,50,000 of 80C, ₹90,000 HRA exemption, and ₹1,80,000 of home-loan interest (total deductions ₹4,20,000) will usually pay less in the old regime, especially at salaries above ₹12 lakh. We have a full guide to this comparison in our marginal relief explainer — the same “cliff” logic applies around the ₹12 lakh rebate line.
Can you switch between old and new tax regimes every year?
Yes — if you are salaried with no business income. You can pick either regime each financial year while filing your ITR. Your employer’s TDS declaration is not final; you can choose differently at filing time and get any excess TDS back as a refund.
If you have business or professional income (ITR-3/ITR-4), the rules are stricter — see our step-by-step guide on Form 10-IEA for how opting out works.
Marginal relief
The rebate creates a sharp line at ₹12 lakh: at ₹12,00,000 you pay zero, but at ₹12,00,001 the rebate vanishes. To stop this from being unfair, the law gives marginal relief — your total tax (including cess) cannot exceed the amount by which your income crosses ₹12 lakh.
Example: at a taxable income of ₹12,50,000, the excess over ₹12 lakh is ₹50,000. Without relief, the slab-based tax would be about ₹70,200. With marginal relief, you pay only about ₹52,000 (₹50,000 + 4% cess).
Frequently asked questions
Is ₹12 lakh salary tax-free in the new regime in 2026?
Yes. After the ₹75,000 standard deduction, a salary of up to ₹12.75 lakh gross gives taxable income of ₹12 lakh, and the ₹60,000 rebate under Section 156 brings the tax to zero. This applies to salary income — capital gains are taxed separately.
Which tax regime is better for a ₹10 lakh salary?
The new regime. A ₹10 lakh salary gives taxable income of ₹9,25,000 after the standard deduction, and the rebate makes the tax zero. In the old regime, the same salary — even with the full ₹1.5 lakh 80C deduction — still leaves about ₹75,400 in tax.
Can I switch between old and new tax regimes every year?
Yes, salaried taxpayers without business income can switch every year while filing the ITR. Business-income filers face a once-only switch-back rule and must file Form 10-IEA to opt out of the default new regime.
Is HRA allowed in the new tax regime?
No. House Rent Allowance exemption is not available under the new regime. It can be claimed only under the old regime. If you get a large HRA and pay high rent, run both calculations before choosing.
Is the standard deduction available in both regimes?
Yes, but the amounts differ. The new regime gives ₹75,000 to salaried employees and pensioners; the old regime gives ₹50,000. No proof or investment is needed in either case — your employer applies it automatically.
Does the zero-tax benefit apply to capital gains?
No. The Section 156 rebate applies only to normal income taxed at slab rates (salary, pension, business income). Short-term and long-term capital gains are charged at their special flat rates, and the rebate cannot be set off against them.
Official sources
- Income Tax e-Filing Portal (official): https://www.incometax.gov.in
- Central Board of Direct Taxes (CBDT): https://incometaxindia.gov.in
- Income-tax Act, 2025 — official bare text: https://www.indiacode.nic.in
Reviewed by Asuthod Rathod, CA · Last updated: 14 October 2026
Disclaimer: This article is for general information only and is not tax advice. Tax rules change, and your situation may differ — check the official sources above or speak to a qualified tax professional before filing.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.