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Income Tax Slabs for FY 2025-26 (AY 2026-27) — New Regime

The new tax regime under Section 115BAC is the default regime for FY 2025-26. It uses wider slabs, a larger salary standard deduction and a strong Section 87A rebate for resident individuals.

New tax regime slab rates

How Section 87A makes ₹12 lakh tax-free

A resident individual with total income up to ₹12,00,000 can claim a rebate up to ₹60,000, making normal slab-rate tax effectively nil. The rebate excludes special-rate income such as capital gains. For salaried taxpayers, the ₹75,000 standard deduction means salary up to ₹12.75 lakh can result in zero tax under the new regime. Marginal relief applies just above ₹12L.

Standard deduction, cess and surcharge

Salaried taxpayers can claim a standard deduction of ₹75,000 under Section 16(ia). Health and Education Cess is 4% on tax plus surcharge.

The 37% top surcharge rate is removed under the new regime, so the maximum surcharge is 25%. Surcharge on income under Sections 111A, 112A and dividends is capped at 15%. Marginal relief applies at each threshold.

Worked example: ₹15L salary

For a salary of ₹15,00,000, first reduce the ₹75,000 standard deduction. Total income becomes ₹14,25,000. Slab tax is ₹60,000 on ₹4-12L plus 15% on ₹2,25,000, or ₹33,750. Total tax before cess is ₹93,750, and 4% cess is ₹3,750, making ₹97,500.

Special-rate income note

Capital gains and other special-rate income may be taxed separately and may not receive the full Section 87A benefit. Read the capital gains tax guide before filing, and compare regimes in the new vs old tax regime guide.

How the slab system actually works

India uses a progressive, marginal slab system: you are not taxed at a single rate on your whole income. Instead, each slice of income is taxed at its own rate. For example, on ₹10 lakh under the new regime, the first ₹4 lakh is tax-free, the next ₹4 lakh is taxed at 5%, and only the remaining ₹2 lakh is taxed at 10% — not the whole ₹10 lakh at 10%. This is why moving into a higher slab never reduces your take-home pay; only the income above each threshold attracts the higher rate. Your "effective tax rate" (total tax ÷ total income) is therefore always lower than your top slab rate.

Basic exemption and who the slabs apply to

These slabs apply to resident individuals and HUFs. Under the new regime the basic exemption is a flat ₹4 lakh regardless of age. Under the old regime, the exemption depends on age — ₹2.5 lakh below 60, ₹3 lakh for senior citizens (60–79) and ₹5 lakh for super-seniors (80+). Non-residents get the ₹2.5 lakh limit and do not enjoy the higher senior thresholds. Companies, firms and other entities are taxed under separate rate structures, not these individual slabs.

Rebate, surcharge and cess in order

Your final tax is built up in a fixed sequence: compute slab tax, subtract the Section 87A rebate if eligible, add surcharge if income crosses ₹50 lakh, apply marginal relief where a small income rise would otherwise cause a disproportionate tax jump, and finally add 4% Health & Education Cess on the total. Understanding this order explains why someone at exactly ₹12 lakh pays nothing while someone at ₹12.1 lakh pays only a small amount thanks to marginal relief — the calculator applies every one of these steps automatically.