Rates of income-tax & Personal Taxation
Rates of Income-tax
[Clauses 2, 37 & First Schedule]
(w.e.f. 01.04.2026)
| Particulars | Tax rate | Whether any change proposed in Finance Bill, 2025 |
| Individual (opting for old regime), HUF, AOP, BOI and artificial juridical person | As per existing slab rates [stated infra] | No |
| Individual (opting for new regime) | As per proposed new slab rates [discussed infra] | Yes |
| Firms and local authorities | 30% | No |
|
Domestic companies
|
22% plus surcharge @ 10% 15% plus surcharge @ 10% 25% plus surcharge @ 7%/12% 30% plus surcharge @ 7%/12% |
No |
| Foreign company | 35% | No |
Section 115BAC - New Regime
[Clause 37]
(w.e.f. 01.04.2026)
Slab rates under the old regime vs new regime
| Old regime (Age<60 years) | New Regime (AY 2025-26) | New Regime (AY 2026-27) | |||
| Income (in Rs.) | Rate | Income (in Rs.) | Rate | Income (in Rs.) | Rate |
| Up to 2,50,000 | Nil | Up to 3,00,000 | Nil | Up to 4,00,000 | Nil |
| From 2,50,001 to 5,00,000 | 5% | From 3,00,001 to 7,00,000 | 5% | From 4,00,001 to 8,00,000 | 5% |
| From 5,00,001 to 10,00,000 | 20% | From 7,00,001 to 10,00,000 | 10% | From 8,00,001 to 12,00,000 | 10% |
| Above 10,00,000 | 30% | From 10,00,001 to 12,00,000 | 15% | From 12,00,001 to 16,00,000 | 15% |
| Note: All deductions/ exemptions available as compared to new regime | From 12,00,001 to 15,00,000 | 20% | From 16,00,001 to 20,00,000 | 20% | |
| Above 15,00,000 | 30% | From 20,00,001 to 24,00,000 | 25% | ||
| Above 24,00,000 | 30% | ||||
| Note: Education cess @ 4% shall apply in all cases. Surcharge as prescribed shall also be additionally applicable. | |||||
Comments/ Observations:
| Annual income (in Rs.) | Effective Tax rate for AY 2025-26 (including cess) | Effective Tax rate for AY 2026-27 (including cess) |
| 12,00,000 | 6.93% | 0% |
| 16,00,000 | 11.05% | 7.80% |
| 18,00,000 | 13.29% | 9.24% |
| 20,00,000 | 15.08% | 10.40% |
| 25,00,000 | 18.30% | 13.73% |
| 50,00,000 | 24.75% | 22.46% |
- The thrust of the Government, thus, seems to be to make the new taxation regime more attractive and gradually phase out the old regime.
Rebate under section 87A – New Regime
[Clause 2, 20, 24 & First Schedule]
(w.e.f. 01.04.2026)
Section 87A
In terms of section 87A, individual residents whose total income does not exceed certain amounts as specified therein, are eligible to get rebate of 100% of tax or specified amount, whichever is lower. Rebate under that section is set out hereunder:
- Under the old regime - Where total income does not exceed Rs.5,00,000, rebate upto Rs.12,500 is available, resulting in income upto Rs.5,00,000 being tax free.
- Under the new regime –
- For AY 2025-26 – Where total income does not exceed Rs.7,00,000, rebate upto Rs.25,000 is available, resulting in income upto Rs.7,00,000 being tax free.
- For AY 2026-27 – Where total income does not exceed Rs.12,00,000, rebate upto Rs.60,000 is available, resulting in income upto Rs.12,00,000 being tax free. However, rebate shall not be available on income from capital gains or lotteries or any other income on which special rate of tax is provided under the Act.
Marginal Relief:
In a situation where income of the individual resident exceeds Rs.12,00,000, tax liability of the assessee shall not exceed the component of income exceeding Rs.12,00,000.
| Income | Tax payable without marginal relief | Tax payable after marginal relief |
| 12,10,000 | 61,500 | 10,000 |
| 12,30,000 | 64,500 | 30,000 |
| 12,50,000 | 67,500 | 50,000 |
| 12,70,000 | 70,500 | 70,000 |
| 12,75,000 | 71,250 | 71,250 |
| [no marginal relief] |
What is beneficial – Old Regime vs New (Default) Regime? [Clause 37]
- Example 1
Particulars Old Regime New regime (AY 2026-27) Gross Total Income 12,00,000 12,00,000 Less: Deduction under Chapter VI-A - Section 80C 1,50,000 — Total Income 10,50,000 12,00,000 Tax on above 1,27,500 60,000 Less: Rebate under section 87A — (60,000) Tax Liability 1,27,500 0 - Example 2: Individual claims HRA of
Rs.6,00,000
Particulars (With HRA) (Without HRA) Old regime New Regime Old Regime New Regime Income from salary 30,00,000 30,00,000 30,00,000 30,00,000 Less: HRA 6,00,000 — — — Less: LTA 10,000 — 10,000 — Less: Standard deduction [sec 16(ia)] 50,000 75,000 50,000 75,000 Taxable salary income 23,40,000 29,25,000 29,40,000 29,25,000 Income from savings bank interest 25,000 25,000 25,000 25,000 Taxable Income 23,65,000 29,50,000 29,65,000 29,50,000 Less: Deduction under Chapter VI-A - Section 80C 1,50,000 — 1,50,000 — - Section 80D 50,000 — 50,000 — - Section 80TTA 10,000 — 10,000 — Gross Total Income 21,55,000 29,50,000 27,55,000 29,50,000 Tax on above (excluding cess @ 4%) 4,59,000 4,65,000 6,39,000 4,65,000 - Example 3: Salary income is more than Rs.5
crores; HRA is Rs.1.5 crores
Particulars (With HRA) (Without HRA) Old regime New Regime Old regime New Regime Income from salary 10,00,00,000 10,00,00,000 10,00,00,000 10,00,00,000 Less: HRA 1,50,00,000 — — — Less: Standard ded. [section 16(ia)] 50,000 75,000 50,000 75,000 Taxable salary income 8,49,50,000 9,99,25,000 9,99,50,000 9,99,25,000 Income from savings bank interest 5,00,000 5,00,000 5,00,000 5,00,000 Taxable Income 8,54,50,000 10,04,25,000 10,04,50,000 10,04,25,000 Less: Ded. under Chapter VI-A - Section 80C 1,50,000 — 1,50,000 — - Section 80D 50,000 — 50,000 — - Section 80TTA 10,000 — 10,000 — Gross Total Income 8,52,40,000 10,04,25,000 10,02,40,000 10,04,25,000 Tax on above (surcharge + cess) 3,61,67,835 3,86,19,750 4,25,79,435 3,86,19,750
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