Understand the Income Tax rules for Individuals for FY 2026–27 in a simple and practical way. This guide covers new and old tax regime slabs, standard deduction, rebate, exemptions, and key benefits to help taxpayers compare options, reduce confusion, and choose the most suitable tax regime confidently.
For FY 2026–27 (income earned between 1 Apr 2026 to 31 Mar 2027), the tax slab rates for individuals are unchanged from what was already enacted earlier. The New Tax Regime remains the default, while the Old Tax Regime is still available if you opt for it. This is stated in the Finance Bill, 2026, which says there is “no change proposed in tax rates” for these slabs.
Table of Contents
1) Income Tax Slab – FY 2026–27 (New Tax Regime)
This is the default regime for most individuals/HUFs: Same Slab for All Age Groups
| Taxable Income | Tax 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% |
These slab rates are specifically listed in the Finance Bill, 2026.
Big benefit under New Regime
A major relief continues: resident individuals with income up to ₹12 lakh can effectively pay nil tax because of the rebate under section 87A under the new regime. For salaried people, this can go effectively up to ₹12.75 lakh due to the standard deduction. This was announced in Budget 2025 and continues to be reflected in the tax framework carried into FY 2026–27.
2) Income Tax Slab – FY 2026–27 (Old Tax Regime)
If you choose the Old Regime, the slab remains:
For individuals below 60 years
| Taxable Income | Tax Rate |
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Senior Citizens (60–79 years)
| Taxable Income | Tax Rate |
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Super Senior Citizens (80+ years)
| Taxable Income | Tax Rate |
| Up to ₹5,00,000 | Nil |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
These are also confirmed in the Finance Bill, 2026, which says the old-regime slab rates remain the same.
3) Benefits of the New Tax Regime (Most Important Part)
A. No tax up to ₹12 lakh
This is the biggest benefit.
- If your taxable income is up to ₹12,00,000, your income tax can become zero
- If you are salaried, with standard deduction, effective zero-tax level can go up to ₹12.75 lakh
Example:
If your salary income is ₹12.75 lakh and you claim standard deduction, your taxable income may come down enough for nil tax under the new regime.
B. Lower slab rates for middle-income earners
Compared to the old regime, the new regime is more favorable for many taxpayers who do not claim many deductions.
For example:
- Income up to ₹4 lakh → no tax
- Lower step-by-step taxation from 5% to 25%
- Better for:
- salaried employees with fewer investments
- freelancers/professionals with limited deductions
- first-job earners
- people who don’t use 80C, HRA, home loan deductions heavily
4) Benefits of the Old Tax Regime
The old regime is still useful if you claim many deductions and exemptions.
Best for people who claim:
- 80C (LIC, PPF, EPF, ELSS, tuition fee, principal repayment)
- 80D (medical insurance)
- HRA exemption
- Home loan interest
- NPS deduction
- LTA
- other exemptions/deductions
Old Regime can be better if you:
- live on rent and get HRA
- have a housing loan
- invest heavily for tax saving
- have many exemptions through salary structure
5) New Regime vs Old Regime – Which is Better?
Choose New Regime if:
- you want simple tax filing
- you don’t claim many deductions
- your income is around ₹12 lakh
- you want more take-home pay
- you are salaried and prefer convenience
Choose Old Regime if:
- you claim large deductions
- you use 80C + 80D + HRA + home loan
- your tax-saving investments are already high
6) Quick Comparison Table
| Point | New Regime | Old Regime |
| Default option | Yes | No |
| Tax slabs | Lower & more spread out | Traditional |
| Nil tax benefit | Up to ₹12 lakh | Lower rebate structure |
| Salaried relief | Effective up to ₹12.75 lakh | Depends on deductions |
| Deductions allowed | Very limited | Many deductions allowed |
| Paperwork | Less | More |
| Best for | Simple tax planning | Heavy tax savers |
7) Additional Tax Points You Should Know
A. Health & Education Cess
After income tax calculation, 4% cess is added.
B. Surcharge
If income is very high (generally above ₹50 lakh), surcharge may apply. Under the new regime, the highest surcharge is capped lower than the old structure in many cases, making it more attractive for higher earners too. The Finance Bill notes surcharge provisions and marginal relief continue.
C. Standard Deduction
This remains a very important relief for salaried taxpayers and is one reason why ₹12.75 lakh salaried income can effectively become tax-free under the new regime. (Press Information Bureau)
8) Simple Final Conclusion
For FY 2026–27:
- Tax slabs are unchanged
- New Tax Regime remains the main/default regime
- Biggest benefit:
✅ No tax up to ₹12 lakh
✅ For salaried: effective relief up to ₹12.75 lakh
✅ Simpler filing, fewer deductions, less paperwork
✅ Better for most middle-class salaried taxpayers
Best practical advice:
- If you don’t claim many deductions, choose New Regime
- If you claim lots of deductions, compare both before filing
Benefits of the Old Tax Regime (with Maximum Exemption / Deduction Limits)
The Old Tax Regime is beneficial because it allows taxpayers to reduce taxable income through various exemptions and deductions. It is especially useful for salaried employees, home loan holders, investors, and families who regularly spend on insurance, rent, education, and savings.
1) Benefit of Section 80C – Tax Saving Investments
This is one of the most important benefits of the old regime.
Maximum deduction limit: ₹1,50,000
You can claim deduction for investments/payments such as:
- PPF
- EPF
- ELSS
- Life Insurance Premium
- Tax Saving FD
- NSC
- Sukanya Samriddhi Yojana
- Children’s Tuition Fees
- Home Loan Principal Repayment
Benefit
If you invest properly, you can reduce your taxable income by up to ₹1.5 lakh.
Example:
If your income is ₹10,00,000 and you claim full 80C deduction of ₹1,50,000, then taxable income becomes ₹8,50,000.
2) Benefit of Section 80D – Health Insurance
The old regime gives deduction for medical insurance premium.
Maximum deduction limits:
For Self + Spouse + Dependent Children:
- ₹25,000 (if all are below 60 years)
- ₹50,000 (if taxpayer is senior citizen)
For Parents:
- ₹25,000 (if parents are below 60 years)
- ₹50,000 (if parents are senior citizens)
Maximum total possible deduction: ₹1,00,000
(If taxpayer and parents both are senior citizens)
Preventive Health Check-up
- Included within above limit
- Max allowed: ₹5,000
Benefit
If you insure yourself and your parents, you can save significant tax.
Example:
- Self/family premium = ₹25,000
- Senior citizen parents’ premium = ₹50,000
- Total deduction = ₹75,000
3) Benefit of HRA (House Rent Allowance)
This is one of the biggest benefits for salaried employees living in rented accommodation.
Maximum exemption limit: No fixed upper ceiling
HRA exemption is calculated as least of the following:
- Actual HRA received
- Rent paid – 10% of salary
- 50% of salary (for metro city)
40% of salary (for non-metro city)
Benefit
This can reduce taxable income substantially, especially in cities with high rent.
Example:
If you receive high HRA and pay high rent, exemption can be very large, depending on salary and city.
4) Benefit of Home Loan Interest – Section 24(b)
Very important benefit for house property owners.
Maximum deduction limit: ₹2,00,000
(for self-occupied house property)
For let-out property:
- Actual interest may be considered, but set-off against other income is generally restricted to ₹2,00,000 in a financial year.
Benefit
This gives strong tax relief to salaried/home buyers.
Example:
If you pay ₹2 lakh interest on housing loan, your taxable income reduces by ₹2 lakh.
5) Benefit of Home Loan Principal Repayment
Separate from interest benefit.
Maximum deduction limit: ₹1,50,000
(covered under Section 80C overall limit)
Eligible repayment:
- Principal component of home loan EMI
Benefit
You get double home loan tax benefit:
- Interest under Section 24(b) = up to ₹2 lakh
- Principal under 80C = up to ₹1.5 lakh
6) Benefit of NPS – Section 80CCD(1B)
This is an additional benefit over and above 80C.
Maximum deduction limit: ₹50,000
This is available for contribution to:
- National Pension System (NPS)
Benefit
This is extra deduction beyond 80C.
Total benefit:
- 80C = ₹1,50,000
- NPS (80CCD(1B)) = ₹50,000
- Total = ₹2,00,000
7) Benefit of Employer Contribution to NPS – Section 80CCD(2)
A very powerful but often ignored deduction.
Maximum deduction limit:
- Up to 14% of salary (for Central Government employees)
- Up to 10% of salary (for other employees, depending on applicable provisions and salary structure)
(Subject to overall applicable tax provisions)
Benefit
This deduction is over and above:
- 80C = ₹1.5 lakh
- 80CCD(1B) = ₹50,000
This can provide very high tax savings for salaried professionals.
8) Benefit of LTA (Leave Travel Allowance)
Available only in old regime for salaried persons.
Maximum exemption limit: No fixed amount
Exemption is available for actual travel fare only, subject to conditions.
Allowed for:
- Travel within India
- Self and eligible family members
Not allowed for:
- Hotel expenses
- Food expenses
- Shopping
Frequency
- Allowed for 2 journeys in a block of 4 calendar years
Benefit
Useful for salaried employees who travel with family.
9) Benefit of Standard Deduction
Available to salaried employees and pensioners.
Maximum deduction limit: ₹50,000
Benefit
This directly reduces taxable salary without requiring any investment.
Example:
Salary income = ₹8,00,000
Less standard deduction = ₹50,000
Taxable salary = ₹7,50,000
10) Benefit of Professional Tax
If deducted from salary, it is allowed in old regime.
Maximum deduction limit: ₹2,500
(as per state law ceiling in many cases)
Benefit
Small but useful deduction for salaried taxpayers.
11) Benefit of Education Loan Interest – Section 80E
Useful for students/parents repaying education loans.
Maximum deduction limit: No upper monetary limit
You can claim deduction on:
- Interest paid on education loan
Duration:
- Available for 8 years or until interest is fully paid, whichever is earlier
Benefit
Very useful for higher education financing.
12) Benefit of Savings Bank Interest – Section 80TTA
Useful for individuals and HUFs.
Maximum deduction limit: ₹10,000
Allowed on:
- Savings bank account interest
Not allowed on:
- FD interest
- RD interest
Benefit
Good small deduction for ordinary taxpayers.
13) Benefit for Senior Citizens – Section 80TTB
Special benefit for senior citizens.
Maximum deduction limit: ₹50,000
Allowed on:
- Savings account interest
- Fixed deposit interest
- Recurring deposit interest
Benefit
Much better than 80TTA for senior citizens.
14) Benefit of Donations – Section 80G
Old regime allows deduction for eligible donations.
Maximum deduction limit: Depends on type of donation
Can be:
- 100% deduction
- 50% deduction
- Some with qualifying limit
- Some without qualifying limit
Benefit
Useful for taxpayers making charitable donations.
15) Benefit of Disability Deduction – Section 80U
If taxpayer is a person with disability.
Maximum deduction limit:
- ₹75,000 (normal disability)
- ₹1,25,000 (severe disability)
Benefit
Flat deduction irrespective of actual expenses.
16) Benefit for Dependent with Disability – Section 80DD
If taxpayer maintains dependent with disability.
Maximum deduction limit:
- ₹75,000 (normal disability)
- ₹1,25,000 (severe disability)
Benefit
Very useful for family tax planning.
17) Benefit of Specified Disease Treatment – Section 80DDB
For certain specified diseases.
Maximum deduction limit:
- Up to ₹40,000 (non-senior citizen)
- Up to ₹1,00,000 (senior citizen)
(Subject to actual expenses and conditions)
Benefit
Provides relief in medical hardship cases.
18) Benefit of Interest on Electric Vehicle Loan – Section 80EEB
If loan is taken for purchase of electric vehicle.
Maximum deduction limit: ₹1,50,000
(on interest paid)
Benefit
Useful for EV buyers.
19) Benefit of Affordable Housing Loan – Section 80EE / 80EEA
(Only if conditions are satisfied and eligible as per law)
Maximum deduction limits:
- Section 80EE = up to ₹50,000
- Section 80EEA = up to ₹1,50,000
Benefit
Additional tax relief for eligible first-time home buyers.
20) Benefit of Lower Basic Exemption Slab + Rebate
Under old regime, tax slabs still apply separately.
Basic exemption limit:
- ₹2,50,000 (individual below 60 years)
- ₹3,00,000 (senior citizen)
- ₹5,00,000 (super senior citizen)
Rebate under Section 87A
Maximum rebate: ₹12,500
(If taxable income does not exceed prescribed limit under old regime, generally ₹5 lakh)
Benefit
If taxable income is up to eligible threshold, tax can become zero.
21) Biggest Combined Benefit of Old Regime
A taxpayer can combine multiple deductions.
Example of maximum practical tax-saving structure:
- Standard Deduction = ₹50,000
- 80C = ₹1,50,000
- 80D = ₹75,000 / ₹1,00,000
- Home Loan Interest = ₹2,00,000
- NPS = ₹50,000
- HRA = Variable
- LTA = Variable
- 80TTA / 80TTB = ₹10,000 / ₹50,000
- 80E = No limit
- 80G = Depends
- 80U / 80DD = ₹75,000 / ₹1,25,000
Benefit
This is why the old regime can sometimes save more tax than the new regime, especially for salaried and family taxpayers.
Final Conclusion : Main Benefits of the Old Tax Regime
The old regime is best because it allows:
- 80C deduction up to ₹1.5 lakh
- 80D deduction up to ₹1 lakh
- Home loan interest up to ₹2 lakh
- NPS extra deduction up to ₹50,000
- Standard deduction ₹50,000
- HRA exemption (no fixed upper limit)
- LTA exemption
- Education loan interest (no upper limit)
- Savings interest deductions
- Medical/disability/donation benefits
Exemptions / Deductions Allowed in New Tax Regime (with Maximum Limit): For Individuals – FY 2026–27
1) Standard Deduction
This is the most important deduction under the new regime.
Maximum deduction limit: ₹75,000
Allowed for:
- Salaried employees
- Pensioners (in eligible cases)
Benefit
This directly reduces your taxable salary.
Example:
If your salary is ₹12,75,000, then:
- Less Standard Deduction = ₹75,000
- Taxable Income = ₹12,00,000
This is why many salaried taxpayers can effectively reach the zero-tax threshold under the new regime.
2) Rebate under Section 87A
This is not exactly a deduction, but it is a major tax relief.
Maximum rebate limit: ₹60,000
Available if:
- You are a resident individual
- Your taxable income does not exceed ₹12,00,000 under the new regime
Benefit
If your taxable income is up to ₹12 lakh, your tax liability can become zero (subject to normal conditions).
Important: Rebate generally does not apply to income taxed at special rates like certain capital gains.
3) Employer Contribution to NPS – Section 80CCD(2)
This is one of the biggest deductions still allowed in the new regime.
Maximum deduction limit:
- Up to 14% of salary (for Central / eligible Government employees)
- Up to 10% of salary (for other employees, depending on applicable rules)
Salary here generally means:
- Basic Salary + Dearness Allowance (if applicable)
Benefit
If your employer contributes to your NPS account, you can claim this deduction even in the new regime.
This is over and above standard deduction.
Example:
If salary for this purpose = ₹10,00,000
and employer contributes ₹1,00,000 to NPS,
you may claim deduction up to eligible limit.
4) Deduction for Agniveer Corpus Fund – Section 80CCH
If applicable to the taxpayer.
Maximum deduction limit:
- No specific fixed monetary cap stated in the usual way
- Deduction allowed for eligible contribution made to Agniveer Corpus Fund
Benefit
This deduction is specifically allowed even under the new regime for eligible persons.
(Relevant only for specific taxpayers, not general salaried/public users.)
5) Conveyance / Transport Allowance for Specially-Abled Employees
A limited exemption is still available in specific cases.
Maximum exemption limit:
Allowed as per prescribed rules for eligible employees with disability.
Benefit
This exemption is still available in certain notified situations under the new regime. (Policybazaar)
6) Allowances for Official Duty / Employment Purpose
Some reimbursements are still allowed because they are treated as official expense-related allowances, not personal tax-saving deductions.
Maximum exemption limit:
No standard fixed common limit
It depends on:
- actual expense
- nature of allowance
- official use
- employer policy
Examples:
- travel for official duty
- transfer-related allowances
- daily allowance in some official situations
Benefit
These remain allowed in limited employment-related cases.
7) Interest on Home Loan for Let-Out Property (Limited Practical Benefit)
This needs careful understanding.
Maximum practical benefit: No separate direct ₹2 lakh deduction like old regime self-occupied house
In New Regime:
- Self-occupied house → deduction not available
- Let-out property → interest may still be considered while computing house property income, subject to overall tax treatment rules
Important
You cannot generally claim the classic old-regime style home loan deduction for self-occupied property in the new regime.
8) Family Pension Deduction
If a person receives family pension, a standard deduction may be available.
Maximum deduction limit:
Lower of:
- ₹25,000, or
- 1/3rd of such pension
Benefit
This is useful for eligible pension recipients and is allowed under the new regime in applicable cases. (This benefit has been aligned in recent tax framework changes and is commonly recognized in new-regime computation.)
These popular deductions/exemptions are generally NOT allowed:
| Deduction / Exemption | Max Limit | Allowed in New Regime? |
| 80C (PPF, LIC, ELSS, EPF voluntary, tuition fee, principal repayment) | ₹1,50,000 | ❌ No |
| 80D (Health Insurance) | ₹25,000 / ₹50,000 / ₹1,00,000 | ❌ No |
| HRA | Variable | ❌ No |
| LTA | Variable | ❌ No |
| Home Loan Interest (Self-occupied) | ₹2,00,000 | ❌ No |
| 80E (Education Loan Interest) | No limit | ❌ No |
| 80G (Donations) | Variable | ❌ No (generally) |
| 80TTA | ₹10,000 | ❌ No |
| 80TTB | ₹50,000 | ❌ No |
| 80CCD(1B) (Self NPS contribution) | ₹50,000 | ❌ No |
| Professional Tax | Usually ₹2,500 | ❌ No |
| Children Education / Hostel Allowance | Limited | ❌ Mostly not available as normal exemption |
Maximum Important Benefits Summary (New Regime)
| Allowed Benefit | Maximum Limit |
| Standard Deduction | ₹75,000 |
| 87A Rebate | ₹60,000 |
| Employer NPS – 80CCD(2) | Up to 10% / 14% of salary |
| Family Pension Deduction | ₹25,000 or 1/3rd, whichever is lower |
| Agniveer Corpus Fund – 80CCH | As eligible |
| Official Duty Allowances | As actual / prescribed |
| Specially-abled Transport Allowance | As prescribed |
Disclaimer:
This content is for educational purposes only and does not constitute tax or financial advice. Please verify with official sources or consult a CA/tax professional before making any decision.
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