Under the new (default) regime for FY 2025-26 (AY 2026-27), the income tax slabs 2026 run from 0–₹4 lakh at NIL up to over ₹24 lakh at 30%. Thanks to the enhanced Section 87A rebate, a resident with taxable income up to ₹12 lakh pays zero tax — and salaried people get ₹12.75 lakh effectively tax-free after the ₹75,000 standard deduction.
If you have looked at your salary, a fixed deposit, or a loan application this year and wondered exactly how much tax you owe, this guide lays out the full picture. We cover every slab, the standard deduction, the ₹12 lakh rebate, the "marginal relief" that protects people who earn just over ₹12 lakh, the surcharge bands on high incomes, and a full worked example so you can copy the method for your own number.
The new-regime slab table for FY 2025-26
The new tax regime is now the default. You are taxed under it automatically unless you actively opt for the old regime. Budget 2025 widened the slabs significantly. Here is the structure that applies to the financial year that began on 1 April 2025 (assessment year 2026-27):
| Taxable income (₹) | Tax rate on that slab |
|---|---|
| 0 – 4,00,000 | NIL |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
These are marginal rates. The 30% rate applies only to the rupees above ₹24 lakh, not to your whole income. A 4% Health & Education Cess is added on top of the final tax.
The ₹75,000 standard deduction
Salaried employees and pensioners get a flat standard deduction of ₹75,000 under the new regime — no bills or proof needed. It is subtracted from your gross salary before the slabs apply. So if your CTC-based salary income is ₹13 lakh, your taxable salary is ₹12.25 lakh.
This is also why the headline number for the salaried is ₹12.75 lakh: ₹12 lakh of taxable income that is fully rebated, plus the ₹75,000 deduction sitting on top.
Why ₹12 lakh comes out to zero tax: the Section 87A rebate
Read the slab table literally and ₹12 lakh of income looks like it should attract tax (5% on one slab, 10% on the next). It does — and then the Section 87A rebate cancels it.
For FY 2025-26, the rebate under the new regime wipes out the entire tax for a resident individual whose taxable income is up to ₹12 lakh. The rebate is capped at the actual tax payable on that income (roughly ₹60,000), so it exactly zeroes you out at ₹12 lakh.
Two things people get wrong:
- The rebate is on taxable income, not gross. A salaried person can earn ₹12.75 lakh gross, deduct ₹75,000, land at ₹12 lakh taxable, and pay nothing. Someone with ₹12.75 lakh of taxable income (e.g. business income with no standard deduction) is over the line.
- Capital gains are excluded from the rebate. Special-rate income like equity short-term and long-term capital gains does not get the 87A rebate. If part of your ₹12 lakh is STCG/LTCG, that portion is still taxed at its own rate.
Marginal relief: the cliff just above ₹12 lakh
Here is the trap the law fixes. Without protection, a person at ₹12,00,000 pays ₹0, but a person at ₹12,10,000 would suddenly pay tax on the whole amount above ₹4 lakh — far more than the ₹10,000 of extra income. Earning slightly more would leave you poorer.
Marginal relief caps the tax so that the extra tax never exceeds the extra income above ₹12 lakh.
| Taxable income (₹) | Tax before relief (approx.) | Tax after marginal relief (approx.) |
|---|---|---|
| 12,00,000 | 0 (rebated) | 0 |
| 12,10,000 | ~61,500 | ~10,000 |
| 12,50,000 | ~67,500 | ~50,000 |
| 12,70,000 | ~70,500 | ~64,000* |
*Around ₹12.7–12.75 lakh the normal computed tax becomes lower than the relief cap, so marginal relief stops mattering and you simply pay the regular slab tax (plus 4% cess). Figures are rounded and exclude cess; treat them as illustrative.
The practical takeaway: between ₹12 lakh and roughly ₹12.75 lakh, you effectively hand over only the rupees you earned above ₹12 lakh as tax — never more.
Surcharge on high incomes
On top of slab tax, a surcharge applies once taxable income crosses ₹50 lakh. The new regime keeps the top surcharge lower than the old one — the 37% band was removed under the new regime.
| Taxable income (₹) | Surcharge (new regime) |
|---|---|
| Up to 50 lakh | Nil |
| 50 lakh – 1 crore | 10% |
| 1 crore – 2 crore | 15% |
| Above 2 crore | 25% |
Surcharge is levied on the tax amount, and a separate marginal relief applies at each surcharge threshold so that crossing ₹50 lakh or ₹1 crore by a small margin does not blow up your liability. The 4% cess sits on top of tax-plus-surcharge.
Worked example: tax on ₹18 lakh salary
Let us run a salaried person with ₹18,00,000 gross salary income, no other income, new regime.
Step 1 — Standard deduction. ₹18,00,000 − ₹75,000 = ₹17,25,000 taxable income. This is above ₹12 lakh, so no 87A rebate.
Step 2 — Apply the slabs:
| Slab (₹) | Amount in slab (₹) | Rate | Tax (₹) |
|---|---|---|---|
| 0 – 4,00,000 | 4,00,000 | 0% | 0 |
| 4,00,001 – 8,00,000 | 4,00,000 | 5% | 20,000 |
| 8,00,001 – 12,00,000 | 4,00,000 | 10% | 40,000 |
| 12,00,001 – 16,00,000 | 4,00,000 | 15% | 60,000 |
| 16,00,001 – 17,25,000 | 1,25,000 | 20% | 25,000 |
| Total tax | 1,45,000 |
Step 3 — Add 4% cess. ₹1,45,000 × 1.04 = ₹1,50,800.
So a ₹18 lakh salary carries roughly ₹1.5 lakh in tax under the new regime for FY 2025-26 — an effective rate of about 8.4% on gross. Swap in your own taxable income and the same slab-by-slab method works every time.
How this connects to your loans and savings
Your tax regime quietly shapes other money decisions:
- Loan eligibility uses net (in-hand) income. Lenders assess your repayment capacity after tax and existing EMIs (your FOIR). Understanding your post-tax cash flow helps you borrow sensibly — see FOIR and loan eligibility explained and check a realistic number with the loan eligibility calculator.
- Old regime still rewards deductions. If you claim a home loan interest deduction, 80C, or NPS, the old regime can win. We compare both side by side in new vs old income tax regime and 80C tax-saving investments for 2026.
- FD interest is taxable and triggers TDS. Banks deduct 10% TDS once FD interest crosses ₹50,000 in a year (₹1,00,000 for seniors); it adjusts against your final liability. The mechanics are in TDS on fixed deposits, and you can project interest with the FD calculator.
- Home loan borrowers in the old regime still get Section 24(b) and 80C benefits — details in home loan tax benefits.
Want to see where you stand across tax, savings and goals in one view? Try the financial planner or browse all the calculators.
Thinking about a loan? You can check your eligibility on /apply — it is free, uses a soft pull, and does not affect your credit score — then estimate repayments on the EMI calculator before you commit.
Tax rules, slab limits and surcharge rates can change with each Budget and may vary by your specific situation — always confirm with the Income Tax Department or a qualified advisor, and verify any loan rates directly with the lender. RupeeQuik is a marketplace that connects you to RBI-regulated lending partners.
Frequently Asked Questions
What are the income tax slabs 2026 under the new regime?
For FY 2025-26 (AY 2026-27): 0–₹4 lakh NIL, ₹4–8 lakh 5%, ₹8–12 lakh 10%, ₹12–16 lakh 15%, ₹16–20 lakh 20%, ₹20–24 lakh 25%, and above ₹24 lakh 30%, plus 4% cess. These are the default new-regime rates.
Is income up to ₹12 lakh really tax-free?
Yes, for a resident individual with taxable income up to ₹12 lakh, the Section 87A rebate reduces tax to zero. For salaried people the figure rises to about ₹12.75 lakh because the ₹75,000 standard deduction comes off gross salary first. The rebate does not apply to special-rate capital gains.
What happens if I earn slightly more than ₹12 lakh?
Marginal relief kicks in. It ensures the extra tax you pay never exceeds the income you earned above ₹12 lakh. So at, say, ₹12.10 lakh taxable, your tax is capped near ₹10,000 rather than the full slab amount. This protection fades out around ₹12.75 lakh, after which normal slab tax applies.
Do I get the ₹75,000 standard deduction under the new regime?
Yes. Salaried employees and pensioners receive a flat ₹75,000 standard deduction under the new regime, with no proof required. It is subtracted from salary income before the slabs are applied.
How much tax on ₹18 lakh salary?
After the ₹75,000 standard deduction, taxable income is ₹17.25 lakh. The slab tax works out to ₹1,45,000, and with 4% cess the total is about ₹1,50,800 under the new regime for FY 2025-26.
Should I choose the new or the old regime?
The new regime usually wins if you have few deductions, while the old regime can be better if you claim large 80C investments, NPS, or home loan interest. Compare both for your numbers in our new vs old regime guide.
