The Finance Bill, 2025, has introduced changes in personal income tax rates for the Assessment Year (AY) 2026-27. This article provides a detailed overview of the tax slabs under both the new tax regime (default) and the old tax regime (optional) while comparing tax liabilities at different income levels.
Personal Income Tax Rates for AY 2026-27
New Tax Regime (Default) – Section 115BAC
| Total Income (₹) | Tax Rate |
|---|---|
| Upto ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
- Health & Education Cess: 4% applies to the total tax liability.
- Surcharge: Additional tax for income exceeding ₹50 lakh.
- No deductions or exemptions allowed.
Old Tax Regime (Optional) – No Change in Rates
| Category | Income up to ₹2.5L | ₹2.5L – ₹5L | ₹5L – ₹10L | Above ₹10L |
| Individuals (<60 yrs) | Nil | 5% | 20% | 30% |
| Senior Citizens (60-79 yrs) | Nil (₹3L limit) | 5% | 20% | 30% |
| Super Senior Citizens (80+ yrs) | Nil (₹5L limit) | – | 20% | 30% |
- Rebate under Section 87A: Available for income up to ₹5 lakh (maximum rebate ₹12,500).
- Allows deductions under 80C, 80D, HRA, LTA, etc.
Comparison of Tax Liability under Both Regimes
To understand the impact of these tax rates, let’s compare tax liability for incomes of ₹20 lakh, ₹30 lakh, and ₹40 lakh under both regimes.
Tax Calculation for Different Income Levels
| Total Income (₹) | New Regime (₹) | Old Regime (₹) (After ₹2L deductions) |
| ₹20,00,000 | ₹2,08,000 | ₹3,66,600 |
| ₹30,00,000 | ₹4,99,200 | ₹6,78,600 |
| ₹40,00,000 | ₹8,11,200 | ₹9,90,600 |
Tax Breakdown for ₹20,00,000
✅ New Regime:
- Tax on first ₹4,00,000 – Nil
- ₹4,00,001 – ₹8,00,000 @ 5% = ₹20,000
- ₹8,00,001 – ₹12,00,000 @ 10% = ₹40,000
- ₹12,00,001 – ₹16,00,000 @ 15% = ₹60,000
- ₹16,00,001 – ₹20,00,000 @ 20% = ₹80,000
- Total Tax = ₹2,00,000 + 4% Cess (₹8,000) = ₹2,08,000
✅ Old Regime (After ₹2L Deductions – Net Income ₹18,00,000):
- ₹2.5L – ₹5L @ 5% = ₹12,500
- ₹5L – ₹10L @ 20% = ₹1,00,000
- ₹10L – ₹18L @ 30% = ₹2,40,000
- Total Tax = ₹3,52,500 + 4% Cess (₹14,100) = ₹3,66,600
Disclaimer:
This article is for informational purposes only and should not be considered as professional tax advice. While every effort has been made to ensure accuracy, tax laws are subject to change, and individual circumstances may vary. Readers are advised to consult with a qualified Chartered Accountant or tax professional before making any tax-related decisions. The author and publisher disclaim any liability for any decisions made based on the content of this article.
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