Tax slabs for 2026–27
Budget 2026 did not change any slabs. Under the Income-tax Act, 2025, the new regime remains the default; you have to choose the old regime if you want it.
| New regime (default) | Rate | Old regime | Rate |
|---|
| Up to ₹4 lakh | Nil | Up to ₹2.5 lakh | Nil |
| ₹4–8 lakh | 5% | ₹2.5–5 lakh | 5% |
| ₹8–12 lakh | 10% | ₹5–10 lakh | 20% |
| ₹12–16 lakh | 15% | Above ₹10 lakh | 30% |
| ₹16–20 lakh | 20% | | |
| ₹20–24 lakh | 25% | | |
| Above ₹24 lakh | 30% | | |
4% health and education cess applies on top under both regimes, and surcharge applies above ₹50 lakh.
What each regime allows
| Item | New regime | Old regime |
|---|
| Standard deduction | ₹75,000 | ₹50,000 |
| Rebate | Tax nil up to ₹12 lakh taxable | Tax nil up to ₹5 lakh taxable |
| HRA exemption | No | Yes |
| Section 123 (old 80C), up to ₹1.5 lakh, incl. your EPF | No | Yes |
| Health insurance, Section 126 (old 80D) | No | Yes |
| Home loan interest (self-occupied) | No | Up to ₹2 lakh |
| Professional tax | No | Yes |
Just above ₹12 lakh? Marginal reliefIf your taxable income is a little over ₹12 lakh under the new regime, your tax is limited to the amount above ₹12 lakh. On ₹12.1 lakh taxable, that means ₹10,000 (plus cess), not ₹61,500. The calculator applies this automatically.
New for 2026–27: 50% HRA in 8 cities
Under the old regime, HRA exemption is the lowest of: the HRA you receive; rent paid minus 10% of basic + DA; and 50% of basic + DA in a metro (40% elsewhere). From tax year 2026–27, Rule 279 of the Income-tax Rules, 2026 adds Bengaluru, Hyderabad, Pune and Ahmedabad to Mumbai, Delhi, Kolkata and Chennai for the 50% limit. If you pay more than ₹1 lakh rent a year, your employer will need your landlord's PAN.
Which regime wins? Three examples
| Profile | New regime tax | Old regime tax | Better |
|---|
| ₹10 lakh a year, rent ₹15,000, ₹50,000 in 80C, ₹25,000 health cover | ₹0 | ₹54,287 | New, saves ₹54,287 |
| ₹18 lakh a year, rent ₹30,000, ₹50,000 in 80C, ₹25,000 health cover | ₹1,50,800 | ₹2,25,732 | New, saves ₹74,932 |
| ₹18 lakh a year, basic ₹75,000, rent ₹45,000 in a metro, full 80C, ₹75,000 health cover, ₹50,000 NPS | ₹1,50,800 | ₹1,24,020 | Old, saves ₹26,780 |
All examples include employee PF at 12% of basic up to ₹25,000, ₹2,500 professional tax and 4% cess. The old regime only wins when deductions are large.
For employers: regime choice and TDS
At the start of each tax year, employees tell their employer which regime they want, and TDS is deducted every month on that basis. If they don't choose, the new regime applies by default. Employees can still pick the other regime when filing their return. GoHRMS payroll collects regime choices and investment declarations through the employee app and calculates TDS under either regime.
Frequently asked questions
For most salaried employees the new regime gives lower tax, because of its lower slab rates, the ₹75,000 standard deduction and the rebate that makes taxable income up to ₹12 lakh tax-free. The old regime can still win for people with large deductions, such as high rent with HRA, full Section 123 (old 80C) investments, health insurance and NPS.
No. HRA exemption, Section 123 (old 80C), Section 126 (old 80D), home loan interest on a self-occupied house and professional tax are available only under the old regime.
From tax year 2026–27, eight cities qualify for 50% of basic salary under Rule 279 of the Income-tax Rules, 2026: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Other cities use 40%.
Salaried employees without business income can choose their regime every year. The choice given to the employer decides monthly TDS, but you can still pick the other regime when filing your income tax return.
Sources:
2026–27 slabs unchanged by Budget 2026 (Infyner) ·
HRA 50% in 8 cities, Rule 279 (Patron) ·
Rebate and marginal relief (TDSMAN) ·
New section numbers (BasuNivesh).
Estimates for resident individuals below 60, for salary income only. Not tax advice; marginal relief on surcharge is not applied.