Section 115BAC New Tax Regime: Slabs, Rebates, Surcharge

The Section 115BAC new tax regime is now the default income tax system for individuals, Hindu Undivided Families, and most non-corporate taxpayers, offering seven lower slab rates in exchange for giving up most traditional deductions. For Assessment Year 2026-27, no tax is due on income up to ₹4,00,000, and a rebate under Section 87A pushes the effective zero-tax threshold to ₹12,00,000 of taxable income.1Income Tax Department. Salaried Individuals for AY 2026-27 If you don’t actively choose the old regime, you’re taxed under Section 115BAC by default.2Income Tax Department. FAQs on New Tax vs Old Tax Regime

The regime applies to individuals, HUFs, Associations of Persons (other than cooperative societies), Bodies of Individuals, and Artificial Juridical Persons, whether resident or non-resident.3Income Tax Department. Return Applicable Age does not change the slab structure: unlike the old regime, senior and super-senior citizens use the same brackets as everyone else.

Slab Rates for AY 2026-27

The new regime uses seven progressive brackets, revised by the Finance Act, 2025:

  • Up to ₹4,00,000: nil
  • ₹4,00,001 to ₹8,00,000: 5% on the amount above ₹4,00,000
  • ₹8,00,001 to ₹12,00,000: ₹20,000 plus 10% on the amount above ₹8,00,000
  • ₹12,00,001 to ₹16,00,000: ₹60,000 plus 15% on the amount above ₹12,00,000
  • ₹16,00,001 to ₹20,00,000: ₹1,20,000 plus 20% on the amount above ₹16,00,000
  • ₹20,00,001 to ₹24,00,000: ₹2,00,000 plus 25% on the amount above ₹20,00,000
  • Above ₹24,00,000: ₹3,00,000 plus 30% on the amount above ₹24,00,000
1Income Tax Department. Salaried Individuals for AY 2026-27

Compared with earlier assessment years, the brackets have shifted significantly. The nil-tax threshold moved from ₹3,00,000 to ₹4,00,000, the 30% bracket now starts at ₹24,00,000 instead of ₹15,00,000, and a new 25% band sits between them.

Salaried employees and pensioners can subtract a standard deduction of ₹75,000 from gross salary before the slab rates are applied. Recipients of family pension get a separate standard deduction of ₹25,000.

Rebate Under Section 87A and Marginal Relief

If your total taxable income does not exceed ₹12,00,000, you’re entitled to a rebate under Section 87A of up to ₹60,000, which wipes out your entire tax liability.1Income Tax Department. Salaried Individuals for AY 2026-27 Combined with the ₹75,000 standard deduction, a salaried person earning up to ₹12,75,000 in gross salary pays zero income tax. Non-resident individuals are also eligible for this rebate under the new regime.4Income Tax Department. Non-Resident Individual for AY 2026-2027

Marginal relief prevents a cliff at ₹12,00,000. Without it, someone earning ₹12,10,000 would suddenly owe far more in tax than the extra ₹10,000 above the threshold. Marginal relief caps your total tax so it never exceeds the amount by which your income crosses ₹12,00,000, so the increase is gradual.

Surcharge and Cess

Additional surcharge applies to higher incomes on top of the calculated tax:

  • Income up to ₹50 lakhs: no surcharge
  • ₹50 lakhs to ₹1 crore: 10%
  • ₹1 crore to ₹2 crores: 15%
  • ₹2 crores to ₹5 crores: 25%
  • Above ₹5 crores: 25%

The maximum surcharge under Section 115BAC is capped at 25%, whereas the old regime’s top surcharge rate reaches 37% above ₹5 crores.1Income Tax Department. Salaried Individuals for AY 2026-27 For capital gains taxed under Sections 111A, 112, and 112A, the surcharge is further capped at 15%. A Health and Education Cess of 4% is then added to the combined total of tax and surcharge, and applies in both regimes.

Deductions You Can Still Claim

Most old-regime deductions disappear under Section 115BAC, but a short list survives:

  • Standard deduction of ₹75,000 for salary and pension income.
  • Standard deduction of ₹25,000 for family pension.
  • Employer contribution to the National Pension System under Section 80CCD(2), deductible up to 14% of salary (basic plus dearness allowance), which is more generous than the old regime’s 10% limit.5National Pension System Trust. Tax Benefits under NPS
  • Central Government contribution to an Agniveer Corpus Fund under Section 80CCH.
  • Employment generation deduction under Section 80JJAA.
  • Section 80LA(1A) for units in International Financial Services Centres.
6Income Tax Department. Deductions

A few practical salary allowances continue: travel allowance for official duties, daily allowance, and conveyance allowance. On the property side, interest on a loan for a let-out property under Section 24(b) remains deductible, along with the standard 30% deduction on rental income. Capital gains exemptions under the Section 54 series also stay available.

Deductions You Lose

The trade-off for lower slab rates is a long list of write-offs that no longer apply. Section 80C (PPF, ELSS, life insurance premiums, home loan principal, and similar investments), Section 80D (health insurance), Section 80E (education loan interest), Sections 80DD and 80U (disability-related expenses), and Section 80G (donations) are all unavailable under the new regime.2Income Tax Department. FAQs on New Tax vs Old Tax Regime7Income Tax Department. FAQs on Section 80G Section 80TTA (savings account interest) and Section 80TTB (senior citizen deposit interest) fall away too.

House Rent Allowance and Leave Travel Allowance exemptions vanish on the salary side. Professional tax and the entertainment allowance deduction for government employees cannot be subtracted. Your own voluntary NPS contribution under Section 80CCD(1) is not deductible; only the employer’s share survives.

Interest on a home loan for a self-occupied property is excluded. The deduction for let-out property interest remains, but the ₹2,00,000 cap for self-occupied property under Section 24(b) does not apply here.2Income Tax Department. FAQs on New Tax vs Old Tax Regime The minor child income exemption of ₹1,500 per child is also disallowed. Business-income taxpayers additionally lose additional depreciation under Section 32(1)(iia), incentives under Sections 32AD, 33AB, 33ABA, 35AD, and 35CCC, and the SEZ exemption under Section 10AA.

Choosing Between Regimes and Switching

Your flexibility to move between regimes depends on whether you have business or professional income.

If your income comes from salary, pension, house property, capital gains, or other non-business sources, you can switch every year. You make the choice directly on ITR-1 or ITR-2 with no separate form.8Income Tax Department. Form 10-IEA FAQ

If you have business or professional income, the rules are much tighter. You start in the new regime by default. To opt out and use the old regime, you must file Form 10-IEA electronically before the return filing due date under Section 139(1).9Income Tax Department. Form 10-IEA User Manual Once you opt out and later switch back to the new regime, you get exactly one return: after that second switch, you’re locked into the new regime permanently and can never go back to the old one.2Income Tax Department. FAQs on New Tax vs Old Tax Regime Calculate carefully before committing.

One practical note for salaried employees: if you don’t tell your employer which regime you prefer, TDS will be deducted at the new regime rates. Informing your employer is not the same as formally exercising your option, which happens when you file your return or submit Form 10-IEA.2Income Tax Department. FAQs on New Tax vs Old Tax Regime

Deadlines and Late-Filing Consequences

Whether you’re filing Form 10-IEA or simply choosing your regime on the return, the deadline is the due date under Section 139(1). For most individuals that’s July 31 of the assessment year; if your accounts require a tax audit, the deadline extends to October 31.10Income Tax Department. Section 139 Filing Form 10-IEA after the due date makes the form invalid, which means you’ll be stuck with the default new regime for that year.8Income Tax Department. Form 10-IEA FAQ

Missing the return deadline itself triggers a late filing fee under Section 234F. The maximum penalty is ₹5,000, reduced to ₹1,000 if total income is below ₹5,00,000. On top of the fee, interest under Section 234A accrues at 1% per month on any unpaid tax from the day after the due date. The fee and the interest are separate charges and stack.