For AY 2026-27, the new tax regime starts with a nil slab up to Rs 4 lakh, while the old regime's basic nil slab for an individual below 60 is Rs 2.5 lakh. Those thresholds do not decide the final bill by themselves. A valid comparison uses the taxable income calculated under each regime, the applicable rebate and the 4% health and education cess.
This guide concerns assessment year 2026-27, covering income of financial year 2025-26. It should not be confused with income being earned in Tax Year 2026-27. The tax department's current portal separates liabilities under the 1961 Act for periods up to FY 2025-26 from those under the 2025 Act for Tax Year 2026-27 onwards.
New tax regime slabs for AY 2026-27
The following bands are from the department's AY 2026-27 salaried individual page, checked on 31 October 2026 at 21:45 IST. The same new regime bands appear in the Union Budget memorandum for FY 2025-26. Each percentage applies to the portion within that band, rather than to the person's entire income.
| Taxable income band | New regime rate |
|---|---|
| Up to Rs 4 lakh | Nil |
| Above Rs 4 lakh to Rs 8 lakh | 5% |
| Above Rs 8 lakh to Rs 12 lakh | 10% |
| Above Rs 12 lakh to Rs 16 lakh | 15% |
| Above Rs 16 lakh to Rs 20 lakh | 20% |
| Above Rs 20 lakh to Rs 24 lakh | 25% |
| Above Rs 24 lakh | 30% |
For individuals below 60, the old regime has no tax up to Rs 2.5 lakh, then 5% on the portion up to Rs 5 lakh, 20% on the portion from Rs 5 lakh to Rs 10 lakh, and 30% above Rs 10 lakh. The department lists different old regime basic thresholds for older individuals. The worked example below is restricted to a resident individual below 60.
Old versus new regime calculator: a worked example
Assume ordinary taxable income of Rs 15 lakh under each regime, after all permitted adjustments. This deliberately compares the same taxable amount, not the same gross salary. It excludes special rate income, surcharge and any other relief. It is arithmetic to explain the slabs, not a recommendation of a regime.
The formula is: slab tax = sum of the taxable portion in each band multiplied by that band's rate. For the new regime, the calculation is Rs 4,00,000 x 5% + Rs 4,00,000 x 10% + Rs 3,00,000 x 15% = Rs 1,05,000. Adding cess gives Rs 1,05,000 x 1.04 = Rs 1,09,200.
For the old regime, it is Rs 2,50,000 x 5% + Rs 5,00,000 x 20% + Rs 5,00,000 x 30% = Rs 2,62,500. With cess, Rs 2,62,500 x 1.04 = Rs 2,73,000. A comparison beginning with gross salary would first need separate taxable income calculations because the available exemptions and deductions differ.
Rebate, deductions and the regime choice
The AY page lists a section 87A rebate for eligible resident individuals of up to Rs 60,000 in the new regime when taxable income does not exceed Rs 12 lakh. For the old regime, it lists up to Rs 12,500 when taxable income does not exceed Rs 5 lakh. A rebate reduces tax after calculation; it does not replace the basic nil slab.
The department's regime FAQ explains that the old regime permits a wider set of deductions and exemptions. For example, it identifies HRA exemption as unavailable in the new regime. The AY page separately lists employer pension contributions under section 80CCD(2) among the limited new regime deductions. Eligibility matters more than a generic deduction total.
The new regime is the default for AY 2026-27. The department says eligible non-business taxpayers can exercise the regime choice annually in a return filed by the applicable due date. Business or professional income brings Form 10-IEA and switching restrictions. These procedural conditions need checking alongside the arithmetic, rather than assuming an instruction given to an employer completes the return-level choice.
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