For assessment year 2026-27, the basic exemption limit under income tax in India is ₹4 lakh under the new (default) tax regime and ₹2.5 lakh under the old regime for individuals below sixty.1Income Tax Department. Threshold Limits Under Income-tax Act Resident senior citizens who stay on the old regime get higher thresholds, and a separate rebate under Section 87A can push the effective tax-free income well above these baseline figures.
Exemption Under the New Tax Regime
The new tax regime under Section 115BAC is now the default for every individual, Hindu Undivided Family, and association of persons unless they actively opt out.2Income Tax Department. FAQs on New vs Old Tax Regime The first ₹4 lakh of total income is entirely exempt, regardless of the taxpayer’s age. A twenty-five-year-old salaried professional and a seventy-year-old retiree start from the same threshold.3Income Tax Department. Individual Having Income From Business or Profession for AY 2026-2027
Union Budget 2025 raised this floor from ₹3 lakh to ₹4 lakh starting FY 2025-26. The revised slabs for AY 2026-27 are:
- Up to ₹4 lakh: nil
- ₹4 lakh to ₹8 lakh: 5%
- ₹8 lakh to ₹12 lakh: 10%
- ₹12 lakh to ₹16 lakh: 15%
- ₹16 lakh to ₹20 lakh: 20%
- ₹20 lakh to ₹24 lakh: 25%
- Above ₹24 lakh: 30%
The trade-off for the wider slabs and higher exemption is that most deductions available under the old regime are not permitted. You cannot claim Section 80C investments, health insurance under 80D, or House Rent Allowance. The only Chapter VI-A deductions allowed are employer contributions to NPS under Section 80CCD(2), and deductions under Sections 80CCH and 80JJAA.4Income Tax Department. FAQs on New Tax vs Old Tax Regime The standard deduction for salaried individuals is available under both regimes.
Exemption Under the Old Tax Regime
Taxpayers who opt out of the default and choose the old structure start with a lower baseline. For individuals below sixty and for HUFs, the basic exemption is ₹2.5 lakh per financial year.1Income Tax Department. Threshold Limits Under Income-tax Act Income within this threshold attracts no tax.
The old regime slabs for individuals under sixty are:
- Up to ₹2.5 lakh: nil
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
The old regime remains the better choice for taxpayers with substantial deductions. Full access to Section 80C (up to ₹1.5 lakh), 80D health insurance premiums, HRA exemption, and home loan interest can, together, produce a lower final tax bill than the new regime despite the narrower slabs and lower exemption.
Higher Exemption for Senior and Super Senior Citizens
The old regime raises the exemption with age. Resident individuals aged sixty or above but below eighty, classified as senior citizens, get a basic exemption of ₹3 lakh. Super senior citizens, aged eighty and above, get ₹5 lakh.5Income Tax Department. Senior Citizens and Super Senior Citizens for AY 2026-2027
Two conditions apply. The individual must be a resident of India, and they must be filing under the old regime. A super senior citizen who stays on the default new regime gets the flat ₹4 lakh exemption that applies to everyone, not the ₹5 lakh available under the old system.1Income Tax Department. Threshold Limits Under Income-tax Act The regime choice therefore matters more for older taxpayers than for anyone else. A super senior citizen with limited deductions may still do better on the new regime’s wider slabs; one with significant medical expenses and investment deductions may benefit from the ₹5 lakh exemption plus full deduction access under the old regime.
The age qualification is generous. You only need to turn sixty (or eighty) at any point during the relevant financial year, not at the start of it.
Exemption for Non-Residents
Non-resident individuals face a uniform basic exemption of ₹2.5 lakh under the old regime, regardless of age. A seventy-year-old non-resident does not receive the ₹3 lakh senior citizen threshold that a resident of the same age would get.6Income Tax Department. Non-Resident Individual for AY 2026-2027 Tax liability begins as soon as Indian-sourced income crosses ₹2.5 lakh.
Non-residents can opt for the new regime and its ₹4 lakh exemption, which is often more favourable because they rarely hold the domestic investments needed to make old-regime deductions worthwhile. Under the old regime, non-residents can still claim Section 80C deductions through instruments like ELSS and tax-saving fixed deposits, but several popular options, including the Public Provident Fund and National Savings Certificate, are off-limits to non-residents.
Section 87A Rebate: Tax-Free Income Beyond the Exemption
The basic exemption is not the whole picture. Section 87A provides a separate rebate that can wipe out the entire tax bill if income stays below a higher threshold. The distinction trips people up: the exemption limit decides where tax calculation starts, while the rebate can reduce the calculated tax to zero.
Under the new regime for AY 2026-27, resident individuals with total taxable income up to ₹12 lakh can claim a rebate of up to ₹60,000, which eliminates the entire tax liability on regular income. Under the old regime, the rebate is up to ₹12,500 for resident individuals with taxable income up to ₹5 lakh. In practice, a salaried person earning up to ₹12 lakh on the new regime owes zero income tax after the rebate.
The rebate has limits. It does not apply to capital gains from equity shares or equity mutual funds, income from online gaming, or income from virtual digital assets. It is not available to non-resident individuals or HUFs. If income slightly exceeds ₹12 lakh on the new regime, marginal relief rules ensure the tax liability does not exceed the amount by which income crosses that threshold, avoiding a sudden spike.
When Filing Is Required Even Below the Exemption
Earning below the exemption does not always excuse you from filing a return. The Income Tax Act requires a return if total income before certain exemptions and deductions exceeds the basic threshold.1Income Tax Department. Threshold Limits Under Income-tax Act If gross income is above the limit but falls below it only after claiming Chapter VI-A deductions or exemptions under sections like 54, filing is still required.
Mandatory filing also kicks in on any of these triggers during the financial year:
- Spending more than ₹2 lakh on foreign travel for yourself or anyone else
- Spending more than ₹1 lakh on electricity consumption
- Depositing more than ₹1 crore across one or more current accounts
Resident individuals who hold any foreign bank account, property, financial interest, or signing authority over a foreign account during the calendar year must file regardless of income level. Foreign assets must be disclosed in Schedule FA, and the simpler ITR-1 or ITR-4 forms cannot be used when foreign assets are involved.7Income Tax Department. Enhancing Tax Transparency on Foreign Assets and Income
Filing is also the only way to claim a refund if an employer deducted TDS from salary despite net taxable income falling below the exemption.