On 1 April 2026, India retired a tax law that had been in force since 1962. Any income you earn from that date falls under the Income-tax Act, 2025, not the Income-tax Act, 1961. Your tax rates didn’t change. The vocabulary, the section numbers and several salary rules did. If tax is the part of your money you understand least, sort it out first. Then use our Indian investor’s complete roadmap to plan the rest.
This guide covers everything in one place. It explains what the new income tax act actually changed, gives the slab tables for both regimes, maps the deductions you know (80C, 80D, 24(b), HRA) to their new section numbers, and sorts out what applies to salaried employees, freelancers, investors and NRIs. Bookmark it. Every tax article on Must Read Digest links back here.
Income tax in 2026-27: the short version
- New law, same rates. The Income-tax Act, 2025 applies to income earned from 1 April 2026. Slabs and rates for 2026-27 are the same as 2025-26.
- “Tax year” replaces “previous year” and “assessment year”. Income earned from April 2026 to March 2027 is simply tax year 2026-27.
- Your FY 2025-26 return is still an old-Act return. Income earned up to 31 March 2026 is taxed and filed under the 1961 Act, with the old section numbers.
- Section numbers have moved. 80C is now Section 123, 80D is Section 126, the new regime sits in Section 202 and return filing is Section 263.
- HRA got better for four cities. Bengaluru, Hyderabad, Pune and Ahmedabad joined the 50% HRA list, but only under the old regime.
- Income up to Rs 12 lakh is tax-free in the new regime because of the Rs 60,000 rebate. Salaried employees get to Rs 12.75 lakh with the Rs 75,000 standard deduction.
What the Income-tax Act, 2025 changed (and what it did not)
The new Act came out of a two-step process in Parliament. The original Income-tax Bill, 2025 was introduced on 13 February 2025 and sent to a Select Committee. It was withdrawn after the committee reported, and a revised version, the Income-tax (No. 2) Bill, 2025, passed the Lok Sabha on 11 August 2025 and the Rajya Sabha on 12 August 2025. It received Presidential assent on 21 August 2025 as Act No. 30 of 2025, and it came into force on 1 April 2026.
So the new income tax act is not a Budget-style change to your tax bill. It is a new legal framework built on the same rates. The supporting rulebook, the Income-tax Rules, 2026, was notified by the CBDT on 20 March 2026 and also took effect on 1 April 2026. It replaces the Income-tax Rules, 1962.
What actually changed
- A shorter, reorganised law. The new Act has 536 sections in 23 chapters and 16 schedules. Many conditions that used to sit in long provisos and explanations now appear as tables.
- One “tax year” instead of two years. The confusing previous year / assessment year pairing is gone. More on this below.
- New section numbers for almost everything. Chapter VI-A deductions (Sections 80A to 80U) are now Chapter VIII, starting at Section 122.
- TDS in three sections instead of dozens. TDS on salary is Section 392. TDS on other payments, which used to be spread across the 194 series, is consolidated into Section 393. TCS is Section 394.
- Fewer rules and forms. According to the CBDT’s notification coverage, the new Rules cut the number of rules from 511 to 333 and forms from 399 to 190.
- Renamed salary forms. From tax year 2026-27, the employer’s TDS certificate (Form 16) becomes Form 130, and the declaration you give your employer for HRA, home loan interest and LTC (Form 12BB) becomes Form 124.
- Higher limits for some perquisites and allowances. The 2026 Rules raised several limits that hadn’t moved in decades, such as tax-free employer meals and children’s education allowance. We cover these under salaried employees below.
What did not change
- Tax rates and slabs. Both regimes carry the same slabs into 2026-27. Budget 2026 did not touch them.
- The choice of regime. The new regime is still the default, and you can still opt for the old one.
- Deduction limits. The Rs 1.5 lakh cap under the old 80C (now Section 123) is the same, and so are the limits for health insurance, NPS and home loan interest.
- Capital gains rates. Listed equity is still taxed at 20% short-term and 12.5% long-term (above Rs 1.25 lakh a year).
- Cess. The 4% health and education cess still applies on top of tax and surcharge.
The biggest practical trap is the transition year. For income you earned between April 2025 and March 2026, the 1961 Act still applies throughout. That return, the one most people filed by July 2026, uses the old section numbers. The new numbers only matter from tax year 2026-27, which you’ll file in 2027. Your employer’s TDS this year, and the advance tax you pay in September and December 2026, already fall under the new Act.
Tax year vs assessment year: the new terminology
Under the old law, every year of income had two names. Income earned from April 2024 to March 2025 was the “previous year” 2024-25, but it was assessed in “assessment year” 2025-26. People mixed them up constantly. Tax portals asked for the AY. Banks and employers talked about the FY. Every year someone filed with the wrong year selected.
The new Act scraps both terms. There is just a tax year: the 12-month financial year running from 1 April to 31 March. You earn income in tax year 2026-27, and you file and get assessed for tax year 2026-27. One label, used everywhere.
One special case: if you set up a new business or profession, or a new source of income starts during the year, your first tax year begins on that date and ends on the following 31 March. So a freelancer who starts out in September 2026 has a first tax year of September 2026 to March 2027.
| Period you earned the income | Old-law label | New-law label | Which Act applies |
|---|---|---|---|
| 1 Apr 2025 to 31 Mar 2026 | FY 2025-26 / AY 2026-27 | Not applicable | Income-tax Act, 1961 |
| 1 Apr 2026 to 31 Mar 2027 | Would have been AY 2027-28 | Tax year 2026-27 | Income-tax Act, 2025 |
| 1 Apr 2027 to 31 Mar 2028 | Would have been AY 2028-29 | Tax year 2027-28 | Income-tax Act, 2025 |
Expect to see both sets of labels for a while. Notices, refunds and reassessments for older years will still say “assessment year”, because those years belong to the 1961 Act. That’s not an error.
Income tax slabs 2026-27: new regime and old regime
The new regime is the default. If you don’t actively choose the old regime, your employer deducts TDS, and your return is computed, under the new regime (Section 202 of the 2025 Act, which replaces Section 115BAC).
Income tax slabs 2026-27 new regime
| Total income (Rs) | Tax 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% |
Three things make the new regime cheaper than the table suggests:
- Rebate of up to Rs 60,000 (old Section 87A, now Section 156) for resident individuals with total income up to Rs 12 lakh. That wipes out the entire tax at that level.
- Standard deduction of Rs 75,000 for salaried employees and pensioners. Combined with the rebate, a salary of Rs 12.75 lakh pays zero tax.
- Marginal relief just above Rs 12 lakh. If your income crosses Rs 12 lakh by a small amount, the tax payable can’t exceed the amount by which your income exceeds Rs 12 lakh. So earning a little more never leaves you worse off.
One catch: the rebate doesn’t cover tax on income charged at special rates, such as short-term or long-term capital gains on listed shares and equity funds. If your salary is Rs 10 lakh and you also book Rs 2 lakh of short-term equity gains, the 20% tax on those gains is still payable.
Old regime slabs
| Total income (Rs) | Below 60 | Senior (60 to 79) | Super senior (80+) |
|---|---|---|---|
| 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% |
The old regime’s standard deduction for salaried employees is Rs 50,000. In return for the higher rates, it allows the long list of deductions and exemptions: 80C, 80D, HRA, home loan interest and the rest.
Surcharge, for higher incomes
| Total income | Old regime | New regime |
|---|---|---|
| Rs 50 lakh to Rs 1 crore | 10% | 10% |
| Rs 1 crore to Rs 2 crore | 15% | 15% |
| Rs 2 crore to Rs 5 crore | 25% | 25% |
| Above Rs 5 crore | 37% | 25% (capped) |
Worked example: Rs 15 lakh salary
Take a salaried employee earning Rs 15 lakh a year with no HRA claim.
New regime: Rs 15,00,000 minus the Rs 75,000 standard deduction leaves Rs 14,25,000 taxable. Tax is Rs 20,000 (4 to 8 lakh) + Rs 40,000 (8 to 12 lakh) + Rs 33,750 (15% on the last Rs 2.25 lakh) = Rs 93,750. With 4% cess: Rs 97,500.
Old regime, with full 80C (Rs 1.5 lakh) and Rs 25,000 of health insurance: Rs 15,00,000 minus Rs 50,000 standard deduction, Rs 1,50,000 and Rs 25,000 leaves Rs 12,75,000 taxable. Tax is Rs 12,500 + Rs 1,00,000 + Rs 82,500 = Rs 1,95,000. With cess: Rs 2,02,800.
The new regime saves over Rs 1 lakh here. For the old regime to just match it at this salary, your total deductions, including the Rs 50,000 standard deduction, would need to reach about Rs 5.94 lakh. That’s only realistic if you pay a large rent with HRA, plus a home loan, plus maxed-out 80C and 80D. Most people at this income should stay in the new regime. Run your own numbers before you decide.
Common deductions: old section to new section mapping
This is the table you’ll actually use. Most deductions survived with the same limits and conditions. They just live at new addresses. For your FY 2025-26 return, keep using the left column. From tax year 2026-27, use the right one.
| What it covers | Old section (1961 Act) | New section (2025 Act) | Limit | New regime? |
|---|---|---|---|---|
| PPF, ELSS, EPF, life insurance, tuition fees, home loan principal and more | 80C | 123 (read with Schedule XV) | Rs 1.5 lakh | No |
| Pension fund contributions | 80CCC | 123 | Within Rs 1.5 lakh | No |
| Your own extra NPS contribution | 80CCD(1B) | 124 | Rs 50,000 | No |
| Employer’s NPS contribution | 80CCD(2) | 124 | Up to 14% of salary (new regime) | Yes |
| Health insurance and preventive check-ups | 80D | 126 | Rs 25,000 (Rs 50,000 for seniors), plus the same again for parents | No |
| Dependant with disability | 80DD | 127 | Rs 75,000 / Rs 1.25 lakh (severe) | No |
| Treatment of specified diseases | 80DDB | 128 | Rs 40,000 (Rs 1 lakh for seniors) | No |
| Education loan interest | 80E | 129 | No cap | No |
| Donations | 80G | 133 | Depends on the institution | No |
| Rent paid without HRA | 80GG | 134 | Up to Rs 5,000 a month | No |
| Savings and deposit interest | 80TTA / 80TTB | 153 | Rs 10,000 / Rs 50,000 (seniors) | No |
| Self with disability | 80U | 154 | Rs 75,000 / Rs 1.25 lakh (severe) | No |
| Home loan interest | 24(b) | 22 | Rs 2 lakh for a self-occupied home | Only for let-out property |
| Standard deduction on salary | 16(ia) | 19 | Rs 75,000 new / Rs 50,000 old | Yes |
| HRA exemption | 10(13A) | Schedule III, with Rule 279 of the 2026 Rules | Formula (see next section) | No |
| Rebate | 87A | 156 | Rs 60,000 new / Rs 12,500 old | Yes |
| New tax regime | 115BAC | 202 | Default regime | – |
| Filing your return | 139 | 263 | – | – |
A few notes on the trickier rows:
- Section 123 and Schedule XV. The old 80C was one long list inside a section. In the new Act, Section 123 gives the deduction and Schedule XV lists the eligible investments and payments. The list and the Rs 1.5 lakh cap are the same.
- Home loan interest under the new regime. You still can’t claim interest on a self-occupied home. For a let-out property, interest is deductible from rental income, but in the new regime a resulting loss can’t be set off against your salary.
- 80D detail. The preventive health check-up allowance (Rs 5,000) sits inside the 80D limit. It isn’t an extra amount on top.
- Rent without HRA (Section 134). If your employer doesn’t pay HRA, the deduction is the lowest of Rs 5,000 a month, 25% of your total income, or rent paid minus 10% of total income.
If you advise clients or file for family members, the safest habit is this: write the year next to the section. “80C (FY 2025-26)” and “Section 123 (TY 2026-27)” are the same deduction, and you’ll avoid confusion with your CA or HR team.
50% HRA cities expanded to 8: who benefits
Under the old rules, only four cities, Mumbai, Delhi, Kolkata and Chennai, got the higher HRA limit of 50% of salary. Every other city, including Bengaluru with its sky-high rents, was capped at 40%.
Rule 279 of the Income-tax Rules, 2026 extends the 50% limit to eight cities:
- Mumbai
- Delhi
- Kolkata
- Chennai
- Bengaluru (new)
- Hyderabad (new)
- Pune (new)
- Ahmedabad (new)
Everywhere else stays at 40%.
How the HRA exemption is calculated
The exempt part of your HRA is the lowest of these three:
- The HRA you actually received
- Rent paid minus 10% of salary
- 50% of salary (in the eight cities) or 40% (elsewhere)
“Salary” here means basic pay plus dearness allowance where it counts for retirement benefits, not your full CTC.
The catch: the new rule only helps if the city cap was holding you back
Because the exemption is the lowest of three numbers, moving from 40% to 50% only helps people for whom the third number was the smallest. That usually means people paying high rent relative to their basic pay. Two Bengaluru examples show the difference.
Example 1: high rent. Basic pay Rs 60,000 a month (Rs 7.2 lakh a year), HRA Rs 30,000 a month (Rs 3.6 lakh), rent Rs 40,000 a month (Rs 4.8 lakh).
| Limit | At 40% (old rule) | At 50% (new rule) |
|---|---|---|
| Actual HRA | Rs 3,60,000 | Rs 3,60,000 |
| Rent minus 10% of salary | Rs 4,08,000 | Rs 4,08,000 |
| City limit (% of salary) | Rs 2,88,000 | Rs 3,60,000 |
| Exempt HRA | Rs 2,88,000 | Rs 3,60,000 |
That’s Rs 72,000 more exempt income. In the 30% slab, with cess, it saves about Rs 22,464 a year.
Example 2: moderate rent. Same salary and HRA, but rent of Rs 28,000 a month (Rs 3.36 lakh). Rent minus 10% of salary is Rs 2,64,000, which is lower than both the 40% limit (Rs 2,88,000) and the 50% limit. The exemption stays at Rs 2,64,000 either way. The new rule saves this person nothing.
Who actually benefits
- Salaried employees in Bengaluru, Hyderabad, Pune or Ahmedabad
- who receive HRA as part of their salary
- who stay in the old regime (HRA isn’t exempt in the new regime)
- whose rent is high compared with their basic pay
The rule names cities, not wider metro regions. If you live in Gurugram, Noida, Thane or Navi Mumbai, don’t assume the 50% limit applies to you. Check with your payroll team.
Timing matters too. The change applies to salary earned from 1 April 2026 (tax year 2026-27). It does not apply to your FY 2025-26 return, where the old four-city rule still governs.
New paperwork for HRA claims
The 2026 Rules also tightened disclosures. When you claim HRA through your employer (now on Form 124), you have to state your relationship with the landlord. The landlord’s PAN is still required if your annual rent exceeds Rs 1 lakh. Paying rent to a parent is still allowed, as long as it’s a genuine arrangement: real transfers, a rent agreement, and your parent reporting the rent as income.
If high rent is the reason the old regime is tempting you, the rent-or-buy question is worth running too. Our rent vs buy calculation on a Rs 70 lakh home shows how the numbers stack up.
Salaried, freelancers, investors and NRIs: what applies to whom
Salaried employees
- Tell your employer your regime choice early. If you don’t, TDS is deducted under the new regime. You can still switch regimes when you file your return, every year, as long as you have no business income.
- Submit Form 124 (formerly 12BB) with rent receipts, landlord details and home loan interest certificates if you’re in the old regime.
- Your Form 16 is now Form 130 for salary paid in tax year 2026-27. The FY 2025-26 certificate you got in 2026 was still Form 16.
- Several perquisite and allowance limits went up under the 2026 Rules. Reported changes include tax-free employer-provided meals rising from Rs 50 to Rs 200 per meal, gifts and vouchers from Rs 5,000 to Rs 15,000 a year, children’s education allowance from Rs 100 to Rs 3,000 a month per child, and hostel allowance from Rs 300 to Rs 9,000 a month per child. Several of these allowance exemptions only help in the old regime, so check how your employer structures them.
- Employer NPS is the one big deduction that works in the new regime. If your company offers it, up to 14% of salary is deductible. It’s often the most tax-efficient component you can ask for in a salary restructure.
Freelancers and professionals
Freelancers don’t have an employer deducting tax monthly, so the rules that matter are presumptive taxation and advance tax.
- Presumptive taxation (old 44ADA, now Section 58 of the 2025 Act). Eligible professionals can declare 50% of gross receipts as profit, without maintaining detailed books. It applies to receipts up to Rs 50 lakh, or Rs 75 lakh if cash receipts are no more than 5% of the total.
- Small businesses (old 44AD, also Section 58) can declare 6% of turnover as profit for digital receipts and 8% for cash, up to Rs 2 crore of turnover (Rs 3 crore if cash receipts are within 5%).
- Advance tax is your responsibility. If you use the presumptive scheme, you can pay the entire year’s advance tax in one instalment by 15 March. Otherwise, you follow the four-instalment schedule below.
- TDS from clients counts. Check your Form 26AS and AIS to make sure every client’s TDS shows up before you file.
- Switching regimes is restricted. If you have business or professional income, you can opt out of the new regime, but you can come back to it only once.
- Due date. Finance Act 2026 set 31 August as the return due date for non-audit business and professional cases, one month later than salaried filers.
Investors
Investment income sits largely outside the slab debate, because much of it is taxed at its own rates.
| Income | How it’s taxed |
|---|---|
| Listed shares and equity funds, held 12 months or less | 20% short-term capital gains |
| Listed shares and equity funds, held over 12 months | 12.5% on gains above Rs 1.25 lakh a year |
| Debt mutual funds bought on or after 1 April 2023 | At your slab rate, regardless of holding period |
| FD and savings interest | At your slab rate (TDS by the bank above the threshold) |
| Dividends | At your slab rate (TDS above Rs 10,000 per company per year) |
| Crypto and other virtual digital assets | Flat 30%, no deduction except cost, losses can’t be set off |
Crypto deserves its own warning. The 30% rate applies to every taxable event, including swapping one coin for another, and there’s 1% TDS on transfers. We break down every taxable event in India’s 30% crypto tax explained.
For fixed-income money, the tax treatment often decides the winner. Since debt funds lost indexation, an FD and a debt fund are taxed the same way, at your slab, and the difference comes down to timing and liquidity. Our comparison of FD vs debt mutual fund vs liquid fund works through it.
Two investor-specific points about the new regime. First, the Rs 60,000 rebate doesn’t cover special-rate capital gains, as noted above. Second, the Rs 1.25 lakh long-term gains exemption is available in both regimes, so harvesting gains up to that limit each year works whichever regime you’re in.
NRIs
- Residency still decides everything. You’re resident if you’re in India for 182 days or more in the tax year, or 60 days in the year plus 365 days over the previous four years. For Indian citizens and persons of Indian origin visiting India, the 60-day test becomes 120 days if Indian income exceeds Rs 15 lakh. Residency remains Section 6 in the new Act.
- Deemed residents. An Indian citizen with Indian income above Rs 15 lakh who isn’t liable to tax in any other country is treated as resident (but not ordinarily resident).
- No rebate. The Rs 60,000 rebate (Section 156) is only for residents. NRIs get the basic exemption limit of the regime they choose, but not the rebate.
- NRE vs NRO. Interest on NRE accounts is tax-free for NRIs. NRO interest is taxable in India, and banks deduct TDS on it.
- Use the treaty. If tax is deducted in India and you’re also taxed abroad, the Double Taxation Avoidance Agreement with your country of residence usually lets you claim credit. You’ll need a Tax Residency Certificate.
- File if you need a refund. NRIs often have excess TDS on NRO interest, rent or property sales. Filing a return is the only way to get it back.
Key dates: advance tax, ITR and belated return
Advance tax for tax year 2026-27
If your tax due for the year, after TDS, is Rs 10,000 or more, you have to pay it in instalments. Resident senior citizens with no business income are exempt.
| Due date | Cumulative amount to pay |
|---|---|
| 15 June 2026 | 15% of total tax |
| 15 September 2026 | 45% |
| 15 December 2026 | 75% |
| 15 March 2027 | 100% |
The next instalment from today is 15 December 2026. If you missed June or September, pay the shortfall now. Interest for late or short payment (the old 234B and 234C, now Sections 424 and 425) is 1% a month, so it grows every month you wait.
Return filing for tax year 2026-27 (filed in 2027)
| Who | Due date |
|---|---|
| Individuals without business income (typically ITR-1, ITR-2) | 31 July 2027 |
| Business and professional cases without audit (typically ITR-3, ITR-4) | 31 August 2027 |
| Cases requiring a tax audit | 31 October 2027 |
| Transfer pricing cases | 30 November 2027 |
| Belated return | 31 December 2027 |
| Revised return | Up to 12 months from the end of the tax year (fee if filed after 9 months) |
Two changes to note. First, Finance Act 2026 gave non-audit business and professional filers until 31 August, while salaried and other non-business filers stay at 31 July. Second, the window to revise a return has been stretched from nine months to twelve months from the end of the tax year. Revising in the last three months costs a fee: Rs 1,000 if income is up to Rs 5 lakh, Rs 5,000 above that.
If you still haven’t filed for FY 2025-26
Income earned in FY 2025-26 (AY 2026-27) falls under the 1961 Act, and its belated return deadline is 31 December 2026. Filing late costs a fee of Rs 5,000 (Rs 1,000 if total income is up to Rs 5 lakh), plus interest on any unpaid tax. Missing 31 December closes the normal route. After that, only an updated return (ITR-U) with additional tax remains. If you’re reading this in October and haven’t filed, do it this week.
A simple 2026-27 tax checklist
- Pick your regime with the Rs 15 lakh example logic above. Add up all your deductions honestly. If they don’t come close to the break-even point, the new regime wins.
- Tell your employer and submit Form 124 if you’re in the old regime.
- If you rent in Bengaluru, Hyderabad, Pune or Ahmedabad, rerun your HRA calculation at 50%.
- Check AIS and Form 26AS every quarter, not just in July. Mismatches are easier to fix early.
- Diarise 15 December and 15 March if you have freelance, rental, capital gains or interest income without enough TDS.
- Use the right section number for the right year: old numbers for FY 2025-26, new numbers from tax year 2026-27.
Three transition-year mistakes to avoid
- Mixing up section numbers. Quoting Section 123 on your FY 2025-26 return, or 80C on a 2026-27 investment declaration, creates needless back-and-forth with your employer or CA.
- Claiming 50% HRA for last year. If you lived in Bengaluru, Hyderabad, Pune or Ahmedabad in FY 2025-26, that return still uses the 40% limit.
- Counting on the rebate to cover capital gains. The Rs 12 lakh zero-tax level applies to normal income. Equity gains taxed at special rates still owe tax, even if your total income is below Rs 12 lakh.
FAQ
What changed with the new Income-tax Act from April 2026?
The Income-tax Act, 2025 replaced the 1961 Act for income earned from 1 April 2026. It introduced the single “tax year”, renumbered almost every section (80C is now Section 123, for example), consolidated TDS into three sections, and came with new Income-tax Rules, 2026. Tax rates and slabs did not change.
What is the “tax year”, and does it replace the assessment year?
Yes. The tax year is the financial year from 1 April to 31 March in which you earn the income. It replaces both “previous year” and “assessment year”. Income earned from April 2026 to March 2027 is tax year 2026-27, and it’s filed and assessed under that same label. Older years keep their assessment-year labels because they fall under the 1961 Act.
Which cities now get the 50% HRA exemption?
Eight cities: Mumbai, Delhi, Kolkata and Chennai, plus Bengaluru, Hyderabad, Pune and Ahmedabad, which were added by Rule 279 of the Income-tax Rules, 2026. It applies from tax year 2026-27 and only under the old tax regime. All other cities remain at 40%.
Do I use Section 80C or Section 123 in my return?
It depends on the year. For income earned in FY 2025-26 (the return due in 2026), use 80C, because the 1961 Act applies. For tax year 2026-27 onwards, the same deduction is Section 123 of the 2025 Act. The limit is Rs 1.5 lakh either way.
Is income up to Rs 12 lakh tax-free in 2026-27?
Under the new regime, for resident individuals, yes. The rebate under Section 156 (formerly 87A) cancels tax of up to Rs 60,000, which covers total income up to Rs 12 lakh. Salaried employees also get the Rs 75,000 standard deduction, so a salary of up to Rs 12.75 lakh is tax-free. The rebate doesn’t apply to capital gains taxed at special rates.
Can I still choose the old tax regime?
Yes. The new regime is the default under Section 202, but you can opt out. Salaried individuals without business income can choose every year. If you have business or professional income, you can return to the new regime only once after opting out.
The bottom line
The new income tax act is a rewrite of the language, not of the rates. For most people, three things matter: learn the term “tax year”, use the right section numbers for the right year, and redo the regime comparison for 2026-27. Salaried renters in Bengaluru, Hyderabad, Pune and Ahmedabad have a new reason to check the old regime. Almost everyone else at moderate incomes will find the new regime cheaper and simpler.
Once you know what you’ll actually take home after tax, decide where every rupee goes. Our guide to how much of your money should go where picks up exactly from there.
Sources: Income-tax Act, 2025 (Act No. 30 of 2025) and Income-tax Rules, 2026, Income Tax Department (incometaxindia.gov.in); Finance Act 2026; CBDT notification of the Income-tax Rules, 2026 (20 March 2026). This guide explains the law in general terms and isn’t tax advice for your specific situation. Check the official text or a chartered accountant before filing.
