Income Tax Slabs for FY 2026-27: What You Actually Pay

Every filing season, the same question comes up: "How much tax will I actually pay this year?" For FY 2026-27 (Assessment Year 2027-28), the new tax regime remains the default, and the slab structure introduced in Budget 2025 continues unchanged. Here's the plain version.

The new regime slabs

Under the new tax regime, income is taxed progressively across seven slabs:

Why income up to ₹12 lakh is effectively tax-free

This is the part that confuses most people. Even though tax is calculated slab-wise from ₹4 lakh onward, Section 87A gives a rebate of up to ₹60,000 to anyone with taxable income up to ₹12,00,000. In practice, this rebate cancels out the tax computed on income in that range — so a taxable income of ₹12 lakh or below results in zero tax payable under the new regime.

For salaried individuals, a standard deduction of ₹75,000 is available before this calculation, which effectively pushes the tax-free threshold higher on gross salary.

What still gets added

• Health & education cess: 4% is added on the tax computed after the rebate.
• Surcharge: applies only above ₹50 lakh in income, at rates that step up with income level.
• Marginal relief: for incomes just above ₹12 lakh, a relief provision caps the tax so it doesn't exceed the income earned above the threshold.

Old regime still exists

The old regime — with its 80C, 80D and HRA deductions — is still available if you opt for it while filing. Whether it works out cheaper than the new regime depends entirely on how much you actually invest and claim. There's no one-size-fits-all answer here; it genuinely needs a side-by-side calculation.

A quick example

Take a salaried individual with a gross annual income of ₹13,00,000. After the ₹75,000 standard deduction, taxable income is ₹12,25,000 — just above the rebate threshold. Tax is computed slab-wise on the full amount, then marginal relief kicks in to ensure the tax payable doesn't exceed the ₹25,000 of income above the ₹12 lakh mark. This is exactly the kind of calculation that's easy to get wrong by hand.