Complete Income Tax Guide — FY 2026-27
India's income tax system has undergone significant changes in recent years, culminating in a substantially revamped New Tax Regime for FY 2026-27 (AY 2027-28). This guide covers everything a salaried individual needs: slabs, rebates, deductions, regime comparison, filing deadlines, and worked examples at common salary levels.
New Tax Regime — FY 2026-27 slabs
The New Regime is the default regime from FY 2024-25 onward. You must explicitly opt for the Old Regime when filing. The slabs for FY 2026-27:
| Taxable Income Slab | Tax Rate | Tax on Slab | Cumulative Tax |
|---|---|---|---|
| Up to ₹4,00,000 | Nil | ₹0 | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹20,000 | ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹40,000 | ₹60,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | ₹60,000 | ₹1,20,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | ₹80,000 | ₹2,00,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | ₹1,00,000 | ₹3,00,000 |
| Above ₹24,00,000 | 30% | — | ₹3,00,000 + 30% above ₹24L |
Plus: 4% Health & Education Cess on total tax. Section 87A rebate of up to ₹60,000 for taxable income up to ₹12,00,000 (brings tax to zero). Standard deduction of ₹75,000 for salaried individuals (so gross salary up to ₹12,75,000 = zero tax).
Old Tax Regime — FY 2026-27 slabs
| Taxable Income | Below 60 | Senior (60–80) | Super Senior (80+) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | — | — |
| Up to ₹3,00,000 | — | Nil | — |
| Up to ₹5,00,000 | — | — | Nil |
| ₹2.5L – ₹5L (or ₹3L–₹5L for senior) | 5% | 5% | — |
| ₹5L – ₹10L | 20% | 20% | 20% |
| Above ₹10L | 30% | 30% | 30% |
Section 87A rebate in Old Regime: up to ₹12,500 for taxable income up to ₹5 lakh. Standard deduction: ₹50,000. Key deductions available: 80C (₹1.5L), 80D (health insurance), 24(b) home loan interest (₹2L), HRA exemption, NPS 80CCD(1B) (₹50K), 80TTA/TTB (savings interest).
New vs Old Regime — worked examples at common salaries
The break-even point is where both regimes result in the same tax. Below this deduction level the New Regime wins; above it the Old Regime wins. Here are detailed comparisons:
Example 1 — ₹8 lakh gross salary
| Item | New Regime | Old Regime |
|---|---|---|
| Gross income | ₹8,00,000 | ₹8,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| 80C + 80D + HRA + other | Not applicable | ₹2,75,000 (assumed) |
| Taxable income | ₹7,25,000 | ₹4,75,000 |
| Tax before rebate | ₹16,250 | ₹11,250 |
| Section 87A rebate | ₹16,250 (full) | ₹11,250 (full) |
| Total tax + cess | ₹0 | ₹0 |
At ₹8L both regimes result in zero tax if you have decent deductions. New Regime wins even with minimal deductions due to the large 87A rebate.
Example 2 — ₹12 lakh gross salary (the key benchmark)
| Item | New Regime | Old Regime (high deductions) |
|---|---|---|
| Gross income | ₹12,00,000 | ₹12,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| Other deductions | — | ₹3,50,000 (80C+80D+HRA) |
| Taxable income | ₹11,25,000 | ₹8,00,000 |
| Tax before rebate | ₹52,500 | ₹75,000 |
| Section 87A rebate | ₹52,500 (full) | ₹0 (TI > ₹5L) |
| Cess (4%) | ₹0 | ₹3,000 |
| Total tax | ₹0 | ₹78,000 |
Example 3 — ₹15 lakh gross salary
| Item | New Regime | Old Regime |
|---|---|---|
| Gross income | ₹15,00,000 | ₹15,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| Other deductions | — | ₹4,50,000 |
| Taxable income | ₹14,25,000 | ₹10,00,000 |
| Tax + cess | ₹1,56,000 | ₹1,17,000 |
| Saving in Old Regime | ₹39,000 if deductions ≥ ₹4.5L | |
Example 4 — ₹20 lakh and ₹30 lakh salary
| Salary | New Regime Tax | Old Regime (max deductions) | Old Regime Saving |
|---|---|---|---|
| ₹20,00,000 | ₹3,27,600 | ₹2,73,000 (if ~₹5L deductions) | ₹54,600 |
| ₹30,00,000 | ₹7,28,400 | ₹6,29,400 (if ~₹5L deductions) | ₹99,000 |
| ₹50,00,000 | ₹14,46,800 | ₹13,00,000+ (max deductions) | ₹1,40,000+ |
At higher incomes (₹20L+), the Old Regime can save meaningful tax if you actually have large deductions. Use the calculator above to enter your exact numbers.
Section 87A rebate — the most important rule in 2026-27
Section 87A provides a rebate (not a deduction) that directly reduces your tax liability to zero:
- New Regime: rebate up to ₹60,000. If your taxable income ≤ ₹12,00,000, tax is nil. If your taxable income = ₹12,00,100, the rebate is withdrawn and you pay full tax of ~₹60,010 + cess.
- Old Regime: rebate up to ₹12,500. If taxable income ≤ ₹5,00,000, tax is nil.
Key deductions under the Old Regime — complete list
| Section | What It Covers | Maximum Limit |
|---|---|---|
| Section 80C | PPF, ELSS, EPF, life insurance premium, NSC, 5-yr FD, home loan principal, tuition fees | ₹1,50,000/year |
| Section 80D | Health insurance premium (self + family) | ₹25,000 (₹50,000 if senior) |
| Section 80D (parents) | Health insurance for parents | ₹25,000 (₹50,000 if parents senior) |
| Section 24(b) | Home loan interest (self-occupied) | ₹2,00,000/year |
| Section 80CCD(1B) | NPS contribution (additional, over 80C) | ₹50,000/year |
| Section 10(13A) | HRA exemption | Calculated (3-limb rule) |
| Section 80TTA | Savings account interest (below 60) | ₹10,000/year |
| Section 80TTB | All interest income (senior citizens) | ₹50,000/year |
| Section 80E | Education loan interest | No limit (8 years) |
| Section 80G | Donations to approved charities | 50–100% of donation |
| Section 80EEA | Home loan interest (affordable housing) | ₹1,50,000/year (additional) |
Income Tax Return (ITR) types and deadlines
| ITR Form | Who Should File |
|---|---|
| ITR-1 (Sahaj) | Salaried, one house property, other sources income up to ₹50L |
| ITR-2 | Capital gains, two or more house properties, foreign income/assets |
| ITR-3 | Business/profession income (with books) |
| ITR-4 (Sugam) | Presumptive business income under 44AD/44ADA/44AE |
Key filing deadlines — FY 2026-27 (AY 2027-28)
- 31 July 2027: Original return for individuals (non-audit cases)
- 31 October 2027: Original return for audit cases
- 31 December 2027: Belated return (Section 139(4)) with late fee
- 31 March 2031: Updated return ITR-U (up to 48 months from end of AY)
Understanding the five types of returns
Original return (139(1)): Filed before the deadline. Best option — preserves right to carry forward losses.
Revised return (139(5)): Used to correct errors in an original return. Must be filed before the belated return deadline (31 December of AY). Can be filed multiple times. Use it if you forgot to declare income, claimed wrong deductions, or made calculation errors.
Belated return (139(4)): Filed after 31 July but before 31 December of the AY. Attracts late fee under Section 234F (₹1,000 if income ≤ ₹5L, else ₹5,000) plus interest on unpaid tax under 234A/B/C. You lose the right to carry forward most losses.
Updated return ITR-U (139(8A)): Available within 48 months of the end of the AY. Can only increase tax liability (not claim refund). Attracts additional tax: 25% if filed within 12 months of the AY end; 50% if between 12–24 months; 60% if 24–36 months; 70% if 36–48 months.
Defective return (139(9)): Issued when the IT department finds an error. Respond within 15 days to rectify; ignoring it voids the return.
NPS — the extra ₹50,000 deduction most people miss
Beyond the ₹1.5 lakh 80C limit, Section 80CCD(1B) allows an additional deduction of up to ₹50,000 per year for contributions to the National Pension System (NPS). This is available under the Old Regime only.
For someone in the 30% tax bracket, ₹50,000 NPS investment saves ₹15,600 in tax (₹50,000 × 30% + 4% cess). The only cost: NPS is locked in until age 60, with 60% tax-free withdrawal at maturity and mandatory 40% annuitisation.
Surcharge — applies to high incomes
| Total Income | Surcharge Rate (New Regime) | Surcharge Rate (Old Regime) |
|---|---|---|
| Up to ₹50 lakh | Nil | Nil |
| ₹50L – ₹1 crore | 10% | 10% |
| ₹1Cr – ₹2Cr | 15% | 15% |
| ₹2Cr – ₹5Cr | 25% | 25% |
| Above ₹5Cr | 25% | 37% |
The New Regime caps surcharge at 25% even for incomes above ₹5 crore, while the Old Regime applies 37%. This makes the New Regime significantly more attractive for very high earners.
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Register your practice →Frequently asked questions
Is income up to ₹12 lakh really tax-free in FY 2026-27?
Yes, for resident individuals under the New Tax Regime. The Section 87A rebate of up to ₹60,000 brings tax to zero for taxable income up to ₹12,00,000. Salaried employees get an additional ₹75,000 standard deduction, so a gross salary of ₹12,75,000 results in zero tax under the New Regime.
What is the standard deduction for FY 2026-27?
₹75,000 under the New Regime and ₹50,000 under the Old Regime for salaried individuals and pensioners. This is automatically deducted before calculating taxable income. Self-employed individuals do not get a standard deduction.
Which tax regime is better for me?
It depends on your deductions. At ₹12L income, the New Regime almost always wins due to the large 87A rebate. At ₹15L+, the Old Regime can win if your total deductions exceed roughly ₹4–5 lakh. Use the calculator above to compare your exact numbers — it takes 30 seconds.
Can I switch between New and Old regime every year?
Salaried individuals without business income can switch every year at the time of filing. Individuals with business income who opt out of the New Regime cannot re-enter it easily. Inform your employer of your regime choice at the start of the year for correct TDS.
What happens if I miss the July 31 filing deadline?
File a belated return under Section 139(4) by December 31 of the AY, paying a late fee of ₹1,000 (income ≤ ₹5L) or ₹5,000 (above ₹5L) under Section 234F, plus interest on tax due. Most importantly, you lose the right to carry forward capital losses and other losses.
I forgot to report some income last year. Can I correct it?
If the original return window is open, file a revised return. If it's closed, file an Updated Return (ITR-U) under Section 139(8A) within 48 months of the AY end. ITR-U attracts additional tax of 25–70% depending on how late you file, but is far better than non-disclosure.
What is the surcharge on income tax?
Surcharge applies to incomes above ₹50 lakh: 10% on ₹50L–₹1Cr, 15% on ₹1Cr–₹2Cr, 25% on ₹2Cr–₹5Cr. Above ₹5Cr: 25% under New Regime, 37% under Old Regime. The New Regime's 25% cap is a major advantage for very high earners.
Is the Section 87A rebate available on special-rate income?
No. The 87A rebate is not available on special-rate incomes such as short-term capital gains (STCG) on equity (Section 111A) or long-term capital gains on equity (Section 112A). If your taxable income of ₹12L includes ₹1L in STCG, the rebate may not cover the full tax liability on that STCG.