Understanding Indian Income Tax Slabs & Rules for FY 2026–27 (AY 2027–28)
The official Union Budget tax structure simplifies tax compliance by enhancing the New Tax Regime with an increased standard deduction of ₹75,000 and raising the full rebate ceiling under Section 87A to ₹12,00,000 taxable income. As a result, salaried employees earning a gross annual income up to ₹12,75,000 pay zero income tax.
New Tax Regime Slabs vs Old Tax Regime Slabs (FY 2026–27)
| Income Slab |
New Tax Regime Rate |
Old Tax Regime Rate |
| ₹0 to ₹2.5 Lakhs |
0% |
0% |
| ₹2.5 Lakhs to ₹4.0 Lakhs |
0% |
5% |
| ₹4.0 Lakhs to ₹5.0 Lakhs |
5% |
5% |
| ₹5.0 Lakhs to ₹8.0 Lakhs |
5% |
20% |
| ₹8.0 Lakhs to ₹10.0 Lakhs |
10% |
20% |
| ₹10.0 Lakhs to ₹12.0 Lakhs |
10% |
30% |
| ₹12.0 Lakhs to ₹16.0 Lakhs |
15% |
30% |
| ₹16.0 Lakhs to ₹20.0 Lakhs |
20% |
30% |
| ₹20.0 Lakhs to ₹24.0 Lakhs |
25% |
30% |
| Above ₹24.0 Lakhs |
30% |
30% |
Section 87A Full Rebate & Marginal Relief Mechanism
Under Section 87A of the Income Tax Act, resident individuals with taxable income up to ₹12,00,000 receive a 100% tax rebate under the New Regime (reducing tax to ₹0). If your taxable income falls between ₹12,00,000 and ₹12,75,000, marginal relief guarantees that your tax payable cannot exceed the amount by which your taxable income exceeds ₹12,00,000.
Worked Example: Tax Comparison at Different Salary Levels
| Gross CTC |
New Regime Tax |
Old Regime Tax (Std + 80C + 80D) |
Best Regime Winner |
| ₹12,75,000 |
₹0 (Full 87A Rebate) |
₹1,24,800 |
New Regime saves ₹1,24,800 |
| ₹15,00,000 |
₹97,500 |
₹1,87,200 |
New Regime saves ₹89,700 |
| ₹20,00,000 |
₹1,95,000 |
₹3,43,200 |
New Regime saves ₹1,48,200 |
| ₹30,00,000 |
₹4,77,750 |
₹6,55,200 |
New Regime saves ₹1,77,450 |
Frequently Asked Questions
Q1: What is the zero-tax income threshold for FY 2026-27 (AY 2027-28)?
Under the New Tax Regime for FY 2026-27, salaried individuals pay ₹0 income tax on gross salary up to ₹12,75,000. This is achieved by combining the ₹75,000 standard deduction with the enhanced Section 87A full tax rebate up to ₹12,00,000 taxable income.
Q2: What are the New Tax Regime income tax slabs for FY 2026-27?
The New Tax Regime slabs are: ₹0 to ₹4 Lakhs (Nil), ₹4 Lakhs to ₹8 Lakhs (5%), ₹8 Lakhs to ₹12 Lakhs (10%), ₹12 Lakhs to ₹16 Lakhs (15%), ₹16 Lakhs to ₹20 Lakhs (20%), ₹20 Lakhs to ₹24 Lakhs (25%), and above ₹24 Lakhs (30%). A 4% Health & Education Cess applies on the total tax liability.
Q3: How does Section 87A Marginal Relief work between ₹12 Lakh and ₹12.75 Lakh taxable income?
Under Section 87A marginal relief, if your taxable income marginally exceeds ₹12,00,000 (up to ₹12,75,000), your total tax liability before cess cannot exceed the incremental income earned above ₹12,00,000. This prevents tax liability from exceeding additional salary earned.
Q4: What standard deduction is allowed under Old vs New Tax Regimes?
For FY 2026-27, salaried employees receive a Standard Deduction of ₹75,000 under the New Tax Regime and ₹50,000 under the Old Tax Regime.
Q5: When is the Old Tax Regime better than the New Tax Regime?
The Old Tax Regime is typically beneficial only for high earners who claim substantial cumulative deductions exceeding ₹3.75 to ₹4.5 Lakhs (such as ₹1.5L under 80C, ₹50k NPS under 80CCD(1B), ₹50k under 80D, and large HRA or ₹2L home loan interest under Section 24b).
Q6: Does this tax calculator store my salary or deduction inputs?
No. SmartPaisa Tools performs all calculations locally in your web browser using JavaScript. No PAN, salary, or financial data is ever stored, tracked, or sent to any server. Sourced from the Income Tax Department of India.