The New Tax Regime for FY 2026-27 is governed by the Income Tax Act 2025, effective from April 1, 2026. Under Section 202 of the new Act (replacing Section 87A), taxpayers with income up to ₹12 lakh pay zero tax — the biggest relief in Indian tax history. This guide covers all new tax slabs, key changes, and whether the new regime is right for you.
New Tax Regime Slabs FY 2026-27 (Income Tax Act 2025)
| Income Range | Tax Rate |
|---|---|
| Up to ₹4 lakh | NIL |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
Key benefit: Under Section 202 of the Income Tax Act 2025 (replacing Section 87A), individuals with total income up to ₹12 lakh get a rebate of ₹60,000, making their effective tax liability zero. For salaried employees, the standard deduction of ₹75,000 extends this benefit to income up to ₹12.75 lakh.
Tax Payable at Different Income Levels (New Regime 2026-27)
| Annual Income | Tax Before Rebate | Rebate (Sec 202) | Final Tax Payable |
|---|---|---|---|
| ₹8 lakh | ₹20,000 | ₹20,000 | ₹0 |
| ₹10 lakh | ₹40,000 | ₹40,000 | ₹0 |
| ₹12 lakh | ₹60,000 | ₹60,000 | ₹0 |
| ₹15 lakh | ₹1,05,000 | Nil | ₹1,05,000 |
| ₹20 lakh | ₹2,10,000 | Nil | ₹2,10,000 |
| ₹25 lakh | ₹4,35,000 | Nil | ₹4,35,000 |
| ₹50 lakh | ₹11,40,000 | Nil | ₹11,40,000 |
New Regime vs Old Regime – Key Differences
| Feature | New Tax Regime (2025) | Old Tax Regime |
|---|---|---|
| Basic exemption limit | ₹4 lakh | ₹2.5 lakh |
| Zero tax up to | ₹12 lakh (after Section 202 rebate) | ₹5 lakh (after Section 87A rebate) |
| Standard deduction | ₹75,000 (salaried) | ₹50,000 |
| Section 80C deduction | Not available | Up to ₹1.5 lakh |
| Section 80D (health insurance) | Not available | Up to ₹25,000–₹1 lakh |
| HRA exemption | Not available | Available |
| Home loan interest (Sec 24b) | Not available | Up to ₹2 lakh |
| NPS employer contribution (80CCD(2)) | Available (14% of salary) | Available (10% of salary) |
Who Should Choose the New Tax Regime?
The new tax regime under Income Tax Act 2025 is beneficial for taxpayers who:
- Have income below ₹12 lakh and want zero tax liability
- Do not have significant 80C investments (ELSS, PPF, LIC, home loan etc.)
- Do not pay high rent and cannot claim HRA
- Prefer simplicity over complex deduction planning
- Have income from multiple sources including freelancing/consulting
Deductions NOT Available in New Tax Regime
If you opt for the new tax regime, the following deductions and exemptions are NOT available: Section 80C (₹1.5 lakh), Section 80D (health insurance), HRA exemption, LTA, Section 24(b) home loan interest, Section 80TTA/80TTB (savings interest), and most other Chapter VI-A deductions. Only Section 80CCD(2) (employer NPS contribution) and standard deduction remain available.
Frequently Asked Questions
Q: Is the new tax regime mandatory from FY 2026-27?
A: No. The new tax regime is the default regime, but you can still opt for the old regime by filing your ITR and explicitly choosing it. For salaried employees, inform your employer at the start of the year.
Q: Can I switch between new and old regime every year?
A: Yes, for salaried individuals and those without business income. Those with business/professional income can switch only once.
Q: What is Section 202 of Income Tax Act 2025?
A: Section 202 of Income Tax Act 2025 replaces Section 87A of the old Income Tax Act 1961. It provides a rebate of up to ₹60,000 for individuals with total income up to ₹12 lakh under the new tax regime.