New tax regime slabs 2026-27: the ₹12 lakh rebate, marginal relief and who pays nothing

Under the new regime in section 202 of the Income-tax Act, 2025, income up to ₹4 lakh is taxed at nil, the next ₹4 lakh at 5%, then 10%, 15%, 20% and 25% in ₹4 lakh steps, and income above ₹24 lakh at 30%. A resident individual whose total income does not exceed ₹12 lakh gets a rebate under section 156 of up to ₹60,000, which cancels the slab tax completely. With the ₹75,000 standard deduction, a salaried resident with gross salary up to ₹12.75 lakh therefore pays no income tax. Just above ₹12 lakh, marginal relief stops tax from jumping. These are the rates for tax year 2026-27 (April 2026 to March 2027).

The slab table for tax year 2026-27

The same slabs apply at every age. Unlike the old regime, there is no higher exemption for senior citizens. The 4% health and education cess is added to the final tax. Surcharge applies only above ₹50 lakh of income and, in the new regime, is capped at 25%.

How the ₹60,000 rebate works

Section 156 allows a resident individual a deduction from tax (a rebate) on the tax computed at the section 202(1) rates:

• If total income does not exceed ₹12 lakh, the rebate is the lower of the tax payable and ₹60,000. Because the slab tax at exactly ₹12 lakh is ₹60,000, the rebate removes it fully.
• The rebate is limited to tax at the slab rates. Tax on income charged at special rates, such as short-term gains on listed equity at 20% or long-term gains above ₹1.25 lakh at 12.5%, is not reduced by it.
• Only residents get it. A non-resident Indian with ₹10 lakh of Indian income pays slab tax without the rebate.

"Total income" means income after the deductions allowed in the new regime. For salary, that means after the ₹75,000 standard deduction. Special-rate capital gains are counted in total income when you test the ₹12 lakh limit, even though the rebate does not reduce the tax on them.

Marginal relief just above ₹12 lakh

Without relief, earning one rupee more than ₹12 lakh would cost ₹60,000 or more in tax. Section 156 prevents this: where total income exceeds ₹12 lakh, the tax at slab rates is reduced so that it does not exceed the amount by which income is more than ₹12 lakh.

Illustrative examples (cess at 4% added):

Relief fades out at a total income of roughly ₹12.7 lakh. Above that, the normal slab tax is lower than the excess over ₹12 lakh, so the slab tax applies. Arithmetic for ₹12,25,000: slab tax = ₹20,000 + ₹40,000 + (₹25,000 × 15%) = ₹63,750. The excess over ₹12 lakh is ₹25,000, so tax is capped at ₹25,000. Add cess of ₹1,000 and the total is ₹26,000.

What the new regime allows you to deduct

Section 202(2) switches off most deductions. You cannot claim the investment deduction (old 80C, now section 123), health insurance (section 126), your own NPS contribution beyond what is allowed, HRA, interest on a self-occupied home loan, professional tax or the old exemptions for leave travel. You can still claim:

• the ₹75,000 standard deduction on salary or pension (section 19);
• your employer's NPS contribution, up to 14% of salary;
• contributions to the Agniveer corpus fund;
• the deduction for additional employee cost for businesses that qualify;
• a standard deduction on family pension received by family members (one-third of the pension or ₹25,000, whichever is less, under section 93 of the 2025 Act; ₹15,000 in the old regime);
• interest on a loan for a let-out property, against the rent from it. A loss from house property cannot be set off against salary.

The deductions guide explains each one in detail.

Who is in the new regime and how to leave it

The new regime applies automatically unless you opt out:

1. Salaried and others without business income: you choose every year. The old regime must be claimed in a return filed by the due date under section 263(1). If you file late, you are taxed under the new regime.
2. People with business or professional income: you opt out by the due date, and the choice continues in later years. You can return to the new regime only once. After that you cannot opt out again unless you stop having business income.

At the start of the year, salaried employees tell their employer which regime to apply for TDS. That choice only sets the monthly deduction. The final choice is made in the return.

Worked example: salary of ₹14 lakh

An illustrative resident employee with gross salary ₹14,00,000 and no other income:

1. Total income = ₹14,00,000 − ₹75,000 = ₹13,25,000.
2. Slab tax = ₹20,000 + ₹40,000 + (₹1,25,000 × 15%) = ₹78,750.
3. Marginal relief? The excess over ₹12 lakh is ₹1,25,000, which is more than ₹78,750, so no relief.
4. Cess = ₹78,750 × 4% = ₹3,150. Total tax = ₹81,900, about 5.85% of gross salary.

To compare this with the old regime for the same salary, see the old vs new regime guide. For take-home pay after PF and professional tax, see the take-home salary guide. The rest of this section starts from the tax year 2026-27 overview.

The new section numbers used here are listed in the section mapping guide, and the effect of the rebate on equity gains is covered in the capital gains rates guide.

Frequently asked questions

Is ₹12 lakh the limit on salary or on total income?

On total income, after deductions. A salaried person can earn ₹12.75 lakh gross and stay within ₹12 lakh after the standard deduction.

Does the rebate cover tax on my mutual fund gains?

No. The rebate covers only tax at slab rates. Tax on equity capital gains at 20% or 12.5% is payable even if total income is under ₹12 lakh. A resident with very low other income may, however, be able to use the unused basic exemption against those gains.

Can I get the rebate if I opt for the old regime?

The old regime has its own, smaller rebate: up to ₹12,500 where total income does not exceed ₹5 lakh.

Do pensioners get the ₹75,000 standard deduction?

Yes, pension from a former employer is taxed as salary and gets the same standard deduction.

Sources

• Income Tax Department: text of sections 156, 19 and 202 of the Income-tax Act, 2025 and tax rate tables
• Income Tax e-filing portal: tax calculators and return utilities
• India Code: official text of the Income-tax Act, 2025