Library / Income-tax Act, 2025: The Professional's Master Guide
17. Tax Rates, Regimes and Rebate for Individuals
17.1 New regime (section 202, old 115BAC)
The new regime is the default for individuals, HUFs, AOPs, BOIs and artificial juridical persons. Slabs for Tax Year 2026-27 (unchanged by Budget 2026):
Total income (Rs.) | Rate |
|---|---|
Up to 4,00,000 | Nil |
4,00,001 to 8,00,000 | 5% |
8,00,001 to 12,00,000 | 10% |
12,00,001 to 16,00,000 | 15% |
16,00,001 to 20,00,000 | 20% |
20,00,001 to 24,00,000 | 25% |
Above 24,00,000 | 30% |
17.2 Old regime
Total income (Rs.) | Below 60 | 60 to 79 | 80 and above |
|---|---|---|---|
Up to 2,50,000 | Nil | Nil | Nil |
2,50,001 to 3,00,000 | 5% | Nil | Nil |
3,00,001 to 5,00,000 | 5% | 5% | Nil |
5,00,001 to 10,00,000 | 20% | 20% | 20% |
Above 10,00,000 | 30% | 30% | 30% |
17.3 Switching between regimes
- No business income: choose each year in the return itself, by the due date.
- With business or professional income: opting out of the new regime needs a form before the due date. Such a person can come back to the new regime only once.
17.4 Rebate (section 156, old 87A) and marginal relief
Regime | Income limit | Maximum rebate |
|---|---|---|
New regime (resident individual) | Total income up to Rs. 12,00,000 | Rs. 60,000 |
Old regime (resident individual) | Total income up to Rs. 5,00,000 | Rs. 12,500 |
In the new regime, if income is slightly above Rs. 12 lakh, tax cannot exceed the income above Rs. 12 lakh.
Illustration 87: Marginal relief Total income Rs. 12,10,000. Normal tax = 20,000 + 40,000 + 1,500 = Rs. 61,500. Income above Rs. 12 lakh = Rs. 10,000. Tax limited to Rs. 10,000 plus cess Rs. 400 = Rs. 10,400. |
17.5 Surcharge and cess
Total income | Surcharge (individuals, HUF) |
|---|---|
Above Rs. 50 lakh up to Rs. 1 crore | 10% |
Above Rs. 1 crore up to Rs. 2 crore | 15% |
Above Rs. 2 crore up to Rs. 5 crore | 25% |
Above Rs. 5 crore | 37% (old regime); capped at 25% in new regime |
Surcharge on dividends and on capital gains under sections 196, 197 and 198 is capped at 15%. Cess of 4% applies on tax plus surcharge. Marginal relief applies at each surcharge threshold.
17.6 Old or new regime: where is the breakeven?
For a salaried individual, the new regime gives a larger standard deduction and lower rates, while the old regime gives exemptions and deductions. The table shows, for different salary levels, the total exemptions and deductions (over and above the Rs. 50,000 standard deduction) that would be needed in the old regime to pay the same tax as in the new regime. If the actual deductions are lower, the new regime is better.
Gross salary (Rs.) | Tax in new regime (with cess) | Deductions needed in old regime to break even |
|---|---|---|
10,00,000 | Nil | Rs. 4,50,000 |
12,75,000 | Nil | Rs. 7,25,000 |
15,00,000 | Rs. 97,500 | Rs. 5,43,750 |
20,00,000 | Rs. 1,92,400 | Rs. 7,08,333 |
25,00,000 and above | Rs. 3,19,800 at 25 lakh | Rs. 8,00,000 (constant above Rs. 24.75 lakh) |
Very few taxpayers have deductions of Rs. 5 to 8 lakh, which is why the new regime suits most people. Those who pay high-rent in the eight metros, have a large home loan on a let out or self-occupied house, and invest the full Rs. 2 lakh in sections 123 and 124, may still benefit from the old regime.
17.7 Marginal relief on surcharge
Where income slightly exceeds a surcharge threshold, the extra tax (including surcharge) cannot exceed the income above the threshold.
Illustration 88: Marginal relief at Rs. 50 lakh Total income (new regime) = Rs. 50,50,000. Tax on the first Rs. 24 lakh = 20,000 + 40,000 + 60,000 + 80,000 + 1,00,000 = Rs. 3,00,000. Tax on the balance Rs. 26,50,000 at 30% = Rs. 7,95,000. Tax = Rs. 10,95,000. Surcharge at 10% = Rs. 1,09,500. Total before relief = Rs. 12,04,500. Tax on exactly Rs. 50,00,000 = 3,00,000 + 30% of 26,00,000 = Rs. 10,80,000, with no surcharge. Income above Rs. 50 lakh = Rs. 50,000. Tax cannot exceed 10,80,000 + 50,000 = Rs. 11,30,000. Marginal relief = 12,04,500 less 11,30,000 = Rs. 74,500. Tax payable = Rs. 11,30,000 plus cess. |
17.8 Senior and super senior citizens
- Old regime: higher basic exemption (Rs. 3 lakh at 60, Rs. 5 lakh at 80); section 153 deduction of Rs. 50,000 on interest (old 80TTB); section 126 limit of Rs. 50,000.
- New regime: same slabs as others, but the Rs. 12 lakh rebate makes most pensioners tax-free.
- A resident senior citizen aged 75 or more with only pension and interest from the same specified bank can furnish a declaration to the bank, which computes and deducts tax; such a person need not file a return.
- No advance tax for resident senior citizens without business income.
Chapter summary • New regime slabs from Rs. 4 lakh; rebate makes income up to Rs. 12 lakh tax-free for residents. • Breakeven deductions for the old regime range from about Rs. 4.5 lakh to Rs. 8 lakh depending on salary. • Marginal relief applies at the rebate and surcharge thresholds. |
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