New Tax Regime Slabs AY 2026-27: Zero Tax up to Rs. 12 Lakh

Slabs at a glance (new regime)

• Up to Rs. 4,00,000: Nil
• Rs. 4,00,001 - Rs. 8,00,000: 5%
• Rs. 8,00,001 - Rs. 12,00,000: 10%
• Rs. 12,00,001 - Rs. 16,00,000: 15%
• Rs. 16,00,001 - Rs. 20,00,000: 20%
• Rs. 20,00,001 - Rs. 24,00,000: 25%
• Above Rs. 24,00,000: 30%

The Rs. 12 lakh rebate (Section 87A)

Budget 2025 raised the Section 87A rebate from Rs. 25,000 to Rs. 60,000 for resident individuals in the new regime, making net tax liability zero for taxable income up to Rs. 12 lakh. Standard deduction of Rs. 75,000 applies to salaried taxpayers and pensioners, extending the zero-tax band to about Rs. 12.75 lakh for salary.

What remains available in the new regime

• Standard deduction Rs. 75,000 (salary/pension)
• Section 80CCD(2) employer NPS contribution (14% for government)
• Section 80CCH(1B) Agniveer fund deposit
• Home loan interest under Section 24(b) for self-occupied property (interest deduction allowed)
• Family pension deduction up to Rs. 25,000

Old vs new - quick rules

The old regime keeps the Rs. 2.5 lakh basic exemption, Rs. 50,000 standard deduction and the full 80C/80D/HRA deductions, with a lower Section 87A rebate (Rs. 12,500 up to Rs. 5 lakh). Compute both before filing; the choice is made at the time of filing the return for FY 2025-26.

Impact on taxpayers

A salaried person earning up to Rs. 12.75 lakh pays nil tax in the new regime with zero paperwork - no investment evidence needed. Marginal relief protects taxpayers just above Rs. 12 lakh from paying tiny amounts of tax.

What you should do

• Estimate FY 2025-26 income and compare both regimes before filing
• Keep Form 16 and bank interest statements ready for the return
• If self-employed and wanting to switch back to the old regime, file Form 10-IEA before the ITR due date
• Remember: TDS already deducted during the year gets adjusted against the final liability in the return