Income Tax in India: 2026 Overview
Understanding income tax is essential for every earning Indian. The tax system offers two regimes - new and old - each with different slab rates and deductions. This guide covers everything you need to know about income tax for the Assessment Year 2026-27 (Financial Year 2025-26).
Tax Slabs: New Regime (Default)
The new tax regime is the default option since Budget 2023. It offers lower rates but limited deductions:
| Income Slab | Tax Rate |
|---|---|
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 - 7,00,000 | 5% |
| Rs. 7,00,001 - 10,00,000 | 10% |
| Rs. 10,00,001 - 12,00,000 | 15% |
| Rs. 12,00,001 - 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
Standard deduction of Rs. 75,000 available. No Section 80C, 80D, or HRA exemption in new regime.
Tax Slabs: Old Regime
| Income Slab | Tax Rate |
|---|---|
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 - 5,00,000 | 5% |
| Rs. 5,00,001 - 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Old regime allows multiple deductions: 80C (Rs. 1.5L), 80D (Rs. 25-75K), HRA, LTA, 24(b), and more.
Key Deductions Under Old Regime
Section 80C (Up to Rs. 1,50,000)
- PPF (Public Provident Fund) - safe 7.1% returns
- ELSS Mutual Funds - 3-year lock-in, equity market returns
- Life Insurance Premium
- EPF (Employee Provident Fund) contribution
- NPS (Tier 1) - additional Rs. 50,000 under 80CCD(1B)
- Home Loan Principal Repayment
- Children's tuition fees (up to 2 children)
- 5-year bank/post office FD
Section 80D (Health Insurance)
- Self & Family premium: up to Rs. 25,000 (Rs. 50,000 if senior citizen)
- Parents' premium: up to Rs. 25,000 (Rs. 50,000 if senior citizen)
- Preventive health checkup: Rs. 5,000 (within above limits)
Section 24(b) - Home Loan Interest
Deduction up to Rs. 2,00,000 per year on home loan interest for self-occupied property. No limit for rented property (but rental income is taxable).
New vs Old Regime: Which is Better?
General guidelines:
- Choose New Regime if: Total deductions/exemptions are less than Rs. 3.75 lakh, or you don't want the hassle of investment proofs.
- Choose Old Regime if: You have significant HRA, home loan interest, and 80C/80D deductions exceeding Rs. 3.75 lakh.
- Income below Rs. 7.5 lakh: New regime is almost always better (zero tax with standard deduction).
- Income Rs. 7.5-15 lakh: Depends on your deduction profile - calculate both.
- Income above Rs. 15 lakh: Old regime often better if you maximize all deductions.
Compare Both Regimes
Use our Old vs New Regime Comparison Tool to calculate your exact tax under both regimes and see which saves you more money.
Related Calculators
Frequently Asked Questions
What is the income tax exemption limit for 2026?
Under the new tax regime, income up to Rs. 3 lakh is tax-free. With Rs. 75,000 standard deduction, effective exemption is Rs. 3.75 lakh. Under old regime, income up to Rs. 2.5 lakh is exempt (Rs. 3 lakh for senior citizens). Section 87A rebate makes income up to Rs. 7 lakh effectively tax-free under new regime.
Is the new tax regime compulsory?
The new regime is the DEFAULT option, but not compulsory. Salaried individuals can choose between old and new regime each financial year. Business income taxpayers who chose new regime can switch back to old regime once. You select your regime while filing ITR.
How do I save income tax legally?
Under old regime: maximize 80C (PPF, ELSS, NPS), 80D (health insurance), 24(b) (home loan interest), HRA exemption, and LTA. Under new regime: limited options - NPS employer contribution (80CCD2), standard deduction. Also consider: tax-loss harvesting, income splitting with family, timing of capital gains.
When is the ITR filing deadline?
For salaried individuals: July 31st of the assessment year. For those requiring audit: October 31st. Revised/belated return: December 31st. Late filing penalty: Rs. 5,000 (Rs. 1,000 if income < Rs. 5 lakh).
Do I need to file ITR if my income is below taxable limit?
It's not mandatory but highly recommended. Filing ITR even with nil tax helps with: loan applications (banks require ITR), visa processing, carrying forward losses, and claiming refund of TDS deducted. It also creates an official income record.