20 Feb 2025Updated: May 2026
The income tax slab structure for FY 2026-27 (AY 2027-28) reflects the revisions introduced in the Finance (No. 2) Act, 2024 and Finance Act, 2025. The new tax regime is now the default — salaried employees and individuals who do not explicitly opt for the old regime at the time of filing are automatically assessed under the new regime. With the new regime's slabs revised downward and the standard deduction enhanced, the tax planning calculus has shifted materially from previous years.
New Tax Regime Slabs: FY 2026-27
Under the new regime (default), the applicable income tax slabs are:
Up to ₹4 lakh: Nil. ₹4–8 lakh: 5%. ₹8–12 lakh: 10%. ₹12–16 lakh: 15%. ₹16–20 lakh: 20%. ₹20–24 lakh: 25%. Above ₹24 lakh: 30%.
A rebate under Section 87A of up to ₹60,000 is available, making income up to ₹12 lakh effectively tax-free under the new regime (after applying the rebate). For salaried individuals with the ₹75,000 standard deduction, the effective nil-tax threshold extends to ₹12.75 lakh gross salary.
Surcharge applies at 10% on tax for income between ₹50 lakh and ₹1 crore, 15% between ₹1 crore and ₹2 crore, and 25% above ₹2 crore (capped at 25% for capital gains). Health and Education Cess of 4% applies on income tax plus surcharge.
Old Tax Regime: Still Relevant for Specific Profiles
The old tax regime slabs remain: up to ₹2.5 lakh (Nil), ₹2.5–5 lakh (5%), ₹5–10 lakh (20%), above ₹10 lakh (30%). The higher rates are partially offset by the full range of exemptions and deductions: HRA under Section 10(13A), LTA under Section 10(5), Section 80C (up to ₹1.5 lakh), Section 80D (medical insurance up to ₹25,000–₹50,000 depending on age), Section 80CCD(1B) (additional NPS contribution of ₹50,000), home loan interest under Section 24(b) (up to ₹2 lakh for self-occupied property), and other Chapter VIA deductions.
The old regime makes sense for individuals with: significant HRA claims (high-rent cities), substantial Section 80C investments already in place, home loan interest deductions, and medical insurance premiums. The break-even point — where the old regime generates lower tax than the new regime despite higher nominal rates — typically occurs when total deductions exceed approximately ₹3.5–4 lakh depending on income level.
Tax Planning Under the New Regime
With most exemptions gone under the new regime, the planning levers are narrower but not absent.
NPS employer contribution (Section 80CCD(2)): Available under both regimes, up to 10% of basic salary. Reduces taxable salary directly — the most impactful new-regime planning tool for salaried employees.
Standard deduction: ₹75,000 flat, no action required.
Capital gains tax management: LTCG on equity above ₹1.25 lakh is taxed at 12.5%; STCG on equity at 20%. Timing of equity redemptions to stay within the ₹1.25 lakh annual LTCG exemption limit reduces equity taxation.
Business income structuring: For those with both salary and business income, choosing the regime carefully — the new regime cannot be opted out of for business income once chosen (except for the year of switching back) — is a one-time decision with long-term implications.
Filing Deadlines and Advance Tax
Advance tax under Section 208 is required in four instalments — 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March — if estimated tax liability exceeds ₹10,000. Salaried individuals whose entire tax is covered by TDS under Section 192 generally do not need to pay advance tax separately, but those with significant non-salary income (rental income, capital gains, interest, business income) must compute and pay advance tax.
The ITR filing deadline for non-audit cases is 31 July. For tax audit cases (businesses with turnover above the Section 44AB thresholds), the deadline is 31 October. Late filing attracts a fee under Section 234F (₹5,000 for income above ₹5 lakh, ₹1,000 for below) and interest under Section 234A on outstanding tax.
Regi Tom Antony And Associates provides income tax planning, ITR filing, advance tax computation, and salary restructuring advisory for individuals, salaried employees, and business owners across India. For SME tax advisory, visit smeadvisory.in. Contact: letstalk@rtaandassociates.com | Kakkanad, Kochi.