Overview
FY 2026-27 is the first year under the Income-tax Act, 2025, which replaced the 1961 Act on 1 April 2026. It is also the first year the law calls a "tax year" instead of "previous year / assessment year" - so FY 2026-27, AY 2027-28 and tax year 2026-27 all mean the same twelve months.
On the numbers, nothing moved: Budget 2026 (1 February 2026) left personal income tax untouched. The slabs, the ₹75,000 standard deduction, the ₹12 lakh Section 87A rebate with marginal relief, surcharge and the 4% cess are exactly what Budget 2025 set for FY 2025-26.
FY 2026-27 New Regime Slab Rates
| Income slab (₹) | Tax rate |
|---|---|
| Up to 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% |
What Budget 2026 Changed (and Didn't)
- Unchanged: slab rates and thresholds, ₹75,000 standard deduction, ₹12 lakh rebate (up to ₹60,000) with marginal relief, surcharge bands (10% / 15% / 25%, capped at 25% in the new regime), 4% cess.
- Unchanged: equity capital gains - 20% short-term (Sec 111A → 196) and 12.5% long-term over ₹1.25 lakh (Sec 112A → 198).
- New: the Income-tax Act 2025 in force from 1 April 2026 - renumbered sections, "tax year" terminology, no change to how much you pay.
- New: Cost Inflation Index for FY 2026-27 notified at 384 (used only for pre-July-2024 property indexation).
Standard Deduction
Salaried individuals and pensioners get a flat ₹75,000 standard deduction in the new regime for FY 2026-27, applied automatically with no proof required. Business and professional income gets no standard deduction. The old regime's figure stays ₹50,000.
Section 156 (formerly 87A) Rebate - Zero Tax up to ₹12 Lakh
If your total taxable income is up to ₹12,00,000, the rebate (up to ₹60,000) wipes out your slab tax. For a salaried person the ₹75,000 standard deduction means a salary of up to ₹12.75 lakh pays nothing.
(Section 156 rebate - the provision you knew as 87A)
Marginal relief softens the cliff just above ₹12 lakh: your tax can never exceed the amount by which income crosses ₹12 lakh, so ₹12.10 lakh taxable pays ₹10,000 (+ cess), not ₹61,500. Two limits to know: the rebate covers slab-rate tax only - never tax on equity capital gains - and those gains still count towards the ₹12 lakh test. How the zero-tax band works →
Cess and Surcharge
A 4% Health & Education Cess is added to the tax in every case. Surcharge applies only when total income exceeds ₹50 lakh: 10% up to ₹1 crore, 15% up to ₹2 crore, 25% beyond - the new regime caps it at 25% (the old regime reaches 37%). Marginal relief applies at each threshold, and the final tax is rounded to the nearest ₹10.
Worked Example
| Gross salary | ₹20,00,000 |
| Less: Standard deduction | ₹75,000 |
| Taxable income | ₹19,25,000 |
| Tax as per slabs (₹20,000 + ₹40,000 + ₹60,000 + ₹65,000) | ₹1,85,000 |
| Health & Education Cess (4%) | ₹7,400 |
| Total tax payable | ₹1,92,400 |
₹4-8L at 5% = ₹20,000 · ₹8-12L at 10% = ₹40,000 · ₹12-16L at 15% = ₹60,000 · ₹16-19.25L at 20% = ₹65,000. Effective rate 9.6%; about ₹1,50,633 in hand per month. Full ₹20 lakh breakdown and break-even deduction →
Old vs New Regime in FY 2026-27
The old regime is still available (Section 202 keeps the opt-out) with its ₹2.5 lakh exemption, 5% / 20% / 30% slabs and the full deduction menu - HRA, 80C (now 123), 80D (126), NPS, home-loan interest. It beats the new regime only when those deductions are large, typically a home loan plus rent plus a maxed 80C. Salaried filers can switch every year; those with business income can return to the old regime only once. Break-even rule and examples →
Key Takeaways
- Same slabs as FY 2025-26 - Budget 2026 changed no rates
- Income-tax Act 2025 applies: new section numbers, same tax
- Zero tax up to ₹12 lakh (₹12.75 lakh salary) via Section 156
- "Tax year 2026-27" = FY 2026-27 = AY 2027-28
- Standard deduction ₹75,000 for salary and pension
- CII for FY 2026-27 is 384