New Tax Regime Slabs and Rates for Individuals and HUF 2026-27 (Income Tax Act 2025)

Under section 202(1) of the Income Tax Act, 2025, an individual or HUF pays tax on total income at seven slab rates from nil to 30%: nothing up to Rs 4,00,000, then 5%, 10%, 15%, 20%, 25% and 30% above Rs 24,00,000. This is the default regime. You stay in it unless you exercise the option under section 202(4). A resident individual with total income up to Rs 12 lakh also gets a rebate under section 156(2) that brings the tax to nil.

This guide covers the slabs, who they apply to, how the rebate works, which deductions the regime allows and which it blocks, and how and when the option is exercised. The figures are from the Act as amended by the Finance Act, 2026, for tax year 2026-27. Amounts below are tax before any surcharge or health and education cess, which this article does not cover.

What are the new tax regime slab rates for 2026-27?

The Table in section 202(1) applies to "total income", which is income after the deductions the regime allows. Each rate applies only to the part of income inside that band.

Sl. No.	Total income band	Rate	Tax on this band (full)	Cumulative tax at top of band
1	Up to Rs 4,00,000	Nil	Rs 0	Rs 0
2	Rs 4,00,001 to Rs 8,00,000	5%	Rs 20,000	Rs 20,000
3	Rs 8,00,001 to Rs 12,00,000	10%	Rs 40,000	Rs 60,000
4	Rs 12,00,001 to Rs 16,00,000	15%	Rs 60,000	Rs 1,20,000
5	Rs 16,00,001 to Rs 20,00,000	20%	Rs 80,000	Rs 2,00,000
6	Rs 20,00,001 to Rs 24,00,000	25%	Rs 1,00,000	Rs 3,00,000
7	Above Rs 24,00,000	30%	30% of the excess	Rs 3,00,000 + 30% of income above Rs 24,00,000

Who does the new tax regime apply to?

Section 202(1) covers five kinds of person:

• an individual;
• a Hindu undivided family (HUF);
• an association of persons, other than a co-operative society;
• a body of individuals, incorporated or not; and
• an artificial juridical person referred to in section 2(77)(g).

The rate Table is the same for all of them. The rebate in section 156, and the higher standard deduction on salary, are for individuals only.

Is there no tax up to Rs 12 lakh? How the section 156 rebate works

The slab Table alone gives nil tax only up to Rs 4,00,000. Tax up to Rs 12 lakh is nil because of the rebate in section 156(2), which applies to a resident individual whose total income is chargeable to tax under section 202(1):

Total income	Rebate under section 156(2)
Rs 12,00,000 or less	100% of tax payable or Rs 60,000, whichever is less (clause (a))
Above Rs 12,00,000	Only if tax payable is more than the income above Rs 12 lakh. The rebate is the amount by which the tax exceeds that excess (clause (b)).

The rebate cannot exceed the tax payable under the section 202(1) rates (section 156(3)). Because tax at Rs 12 lakh is exactly Rs 60,000, a total income of Rs 12,00,000 pays nothing. Clause (b) stops the tax from jumping above what the excess income itself can pay for, a form of marginal relief.

How do I calculate tax in the new regime? Three worked examples

Example 1: salaried, income just above Rs 12 lakh. Meena is a resident individual with salary of Rs 13,00,000 in tax year 2026-27 and no other income. Assumptions: she stays in the default regime and has no deductions except the standard deduction.

Step	Working	Amount
1. Standard deduction, section 19(1), Sl. No. 2(a)	Lower of Rs 75,000 and salary	Rs 75,000
2. Total income	13,00,000 - 75,000	Rs 12,25,000
3. Tax on first Rs 4,00,000	Nil	Rs 0
4. Tax on next Rs 4,00,000	5% of 4,00,000	Rs 20,000
5. Tax on next Rs 4,00,000	10% of 4,00,000	Rs 40,000
6. Tax on Rs 25,000 above Rs 12 lakh	15% of 25,000	Rs 3,750
7. Tax before rebate	20,000 + 40,000 + 3,750	Rs 63,750
8. Excess of income over Rs 12 lakh	12,25,000 - 12,00,000	Rs 25,000
9. Rebate, section 156(2)(b)	63,750 - 25,000	Rs 38,750
10. Tax after rebate	63,750 - 38,750	Rs 25,000

Her tax equals the income above Rs 12 lakh, so she never ends up worse off than someone earning exactly Rs 12 lakh by more than the extra income she earned.

Example 2: salaried, income below Rs 12 lakh. Ravi, a resident individual, earns salary of Rs 9,75,000 in 2026-27 with no other income.

Step	Working	Amount
1. Total income	9,75,000 - 75,000 standard deduction	Rs 9,00,000
2. Tax before rebate	20,000 (5% band) + 10% of 1,00,000 = 10,000	Rs 30,000
3. Rebate, section 156(2)(a)	Lower of 100% of 30,000 and Rs 60,000	Rs 30,000
4. Tax payable	30,000 - 30,000	Rs 0

Example 3: business income in the top slab. A resident individual has total income of Rs 30,00,000 from a business in 2026-27. The rebate does not apply because income is above Rs 12 lakh and the tax is far above the excess.

Band	Working	Tax
Up to Rs 24,00,000	Cumulative tax from the slab table	Rs 3,00,000
Rs 24,00,001 to Rs 30,00,000	30% of 6,00,000	Rs 1,80,000
Total	3,00,000 + 1,80,000	Rs 4,80,000

Which deductions and exemptions are allowed in the new regime?

Section 202(2) says total income is computed without a list of exemptions and deductions. The practical result is a short list of what survives.

Item	Position under section 202
Standard deduction on salary	Allowed at Rs 75,000 or salary, whichever is less (section 19(1), Sl. No. 2(a)). The figure is Rs 50,000 outside this regime.
Tax on employment (professional tax), section 19(1), Sl. No. 1	Blocked by section 202(2)(a)(iv)
Employer contribution to the notified Central Government pension scheme, section 124(1)	Allowed, with the limit raised to 14% of salary for every employer (section 124(2))
Contribution to the Agniveer Corpus Fund by the Central Government, section 125(2)	Allowed
Additional employee cost, section 146	Allowed for an assessee to whom section 63 applies, subject to the conditions in that section
Other Chapter VIII deductions	Blocked, apart from sections 124(1), 124(2), 125(2) and 146 (section 202(2)(a)(xii))
Interest on a self-occupied house, section 22(1)(b) for properties under section 21(6)	Blocked (section 202(2)(a)(v))
Depreciation under section 33(8), and the deductions under sections 45(3)(a), (b), (c), 46, 47(1)(a), 48 and 49	Blocked
Allowances or perquisites under any other law	No exemption or deduction (section 202(2)(c))
Specified allowance exemptions in Schedule III	Blocked for Sl. Nos. 5, 6, 7, 8, 11 and 17, and for Sl. Nos. 12 and 13 except those prescribed. Rule 280 lists allowances for Sl. Nos. 12 and 13.

Two further limits matter for loss-making clients. A loss under the head "Income from house property" cannot be set off against any other head (section 202(2)(b)(ii)). Carried-forward loss or depreciation that is attributable to a blocked deduction cannot be set off either, and section 202(3) treats it as already given full effect, so it is not available later. For the wider set-off rules, see our guide to set-off and carry forward of losses.

Section 202(5) adds one exception: a unit in an International Financial Services Centre can claim the section 147 deduction, subject to that section's conditions.

Real-life scenarios

Neha, a salaried employee with employer NPS. Her employer contributes Rs 1,00,000 in the year to her account under the notified pension scheme. Taking her salary for section 124 as Rs 8,00,000, the cap is 14% of that, which is Rs 1,12,000. The whole Rs 1,00,000 is deductible in the default regime under section 124(1) read with 124(2). Her own voluntary contribution under section 124(3) is a different deduction and is not allowed here.

Suresh, a landlord with a rental loss. Suresh has salary income and a let-out flat that shows a loss of Rs 1,50,000 for the year. In the default regime that loss cannot be set against his salary (section 202(2)(b)(ii)). His salary is taxed in full on the slab rates. If he is deciding whether to opt out, this is one of the numbers to compare. Our guide to house property loss set-off covers the rules outside the default regime.

How do I opt out of the new tax regime, and by when?

Section 202(4) lets a person take the option in the manner prescribed. The timing depends on whether you have business or profession income.

With business or profession income (section 202(4)(a)): the option must be exercised on or before the due date for the return under section 263(1). Once exercised, it applies to later tax years too. It can be withdrawn only once, for a tax year other than the one for which it was first exercised. After that withdrawal you can never exercise it again, unless you cease to have any business or profession income, in which case the clause (b) route is open to you.

Without business or profession income (section 202(4)(b)): the option is exercised along with the return furnished under section 263(1).

Kiran, a freelance consultant. Kiran has business income, files by 31 August, and opts out of the default regime for 2026-27 on the return. That choice carries into 2027-28 without any new step. If he later withdraws it once, he returns to the section 202(1) slabs and cannot opt out again, as long as he keeps earning business income.

Due dates that set the opting deadline (section 263(1)(c))

Person	Due date for the return
Any other assessee, including salaried individuals	31 July
Business or profession income, accounts not required to be audited	31 August
Company, or assessee whose accounts must be audited	31 October
Where section 172 applies	30 November

The Act expresses these as dates in the financial year after the tax year. Rows 2 and 3 apply where section 172 does not apply, and row 4 has no such condition. Check which row your client falls in before you advise on the deadline.

Common mistakes

• Reading "nil tax up to Rs 12 lakh" as a slab. It is a rebate under section 156(2) for resident individuals. HUFs and AOPs do not get it, and it works off total income after deductions.
• Applying the Rs 75,000 standard deduction outside the default regime. Outside it, section 19(1), Sl. No. 2(b) gives Rs 50,000.
• Forgetting that house property loss cannot be set off. Under section 202(2)(b)(ii), the loss does not reduce salary or business income.
• Treating an opt-out as a yearly choice for business income. Under section 202(4)(a), it continues until withdrawn, and withdrawal is allowed only once.
• Missing the deadline for the option. It is tied to the return due date under section 263(1), so a late decision may lose the choice for that year.
• Claiming a Chapter VIII deduction by habit. Only sections 124(1), 124(2), 125(2) and 146 survive in this regime.

Quick reference

Point	Figure	Provision
Zero-tax slab	Up to Rs 4,00,000	Section 202(1)
Top rate starts	Above Rs 24,00,000 at 30%	Section 202(1)
Rebate limit	Rs 60,000 for income up to Rs 12,00,000	Section 156(2)(a)
Salary standard deduction	Rs 75,000	Section 19(1), Sl. No. 2(a)
Employer pension contribution limit	14% of salary	Section 124(1), (2)

Where this is in the Act

• Section 202: new tax regime, rate Table, restrictions, option and IFSC unit
• Section 155 and section 156: rebate for resident individuals
• Section 19(1), Sl. Nos. 1 and 2: salary deductions
• Sections 124, 125 and 146: deductions that survive in this regime
• Section 263(1): return and due dates
• Rule 25: depreciation limited to 40% of written down value for persons taxed under section 202(1) (rule 25(2), Table Sl. No. 2)
• Rule 280: allowances for Schedule III, Sl. Nos. 12 and 13

For a CA firm, the hard part is tracking which clients have opted out, which have business income and so have a continuing option, and when each return is due. Finexo's practice management software keeps client-wise due dates and notes in one place. It does not compute tax or file returns for you. This article is general information, not tax advice.