In a significant announcement, Finance Minister Nirmala Sitharaman has declared that the income tax slabs for the upcoming financial year 2026-2027 will remain unchanged for both the old and new income tax regimes. This decision maintains the status quo from the current fiscal year 2025-2026, providing continuity for taxpayers across India.
Budget 2026: No Changes to Tax Slabs
The much-anticipated Budget 2026 presentation by Finance Minister Nirmala Sitharaman has confirmed that taxpayers will continue to pay income tax according to the existing slabs that are currently effective for FY 2025-2026. This development comes amidst expectations from salaried individuals and middle-class taxpayers who were hoping for additional relief in the new tax regime for the upcoming financial year.
Why No Changes Were Expected
The income tax slabs under the new tax regime underwent a comprehensive overhaul in last year's Budget, making significant changes to the taxation structure. Given this recent major revision, expectations were relatively low for further modifications to either the new or old income tax regimes this year. This anticipation was particularly reasonable considering the impending implementation of the new Income Tax Act, which is scheduled to come into effect within the next few months.
New Tax Regime Slabs for FY 2026-2027
The new income tax regime, which continues to be the default option for taxpayers, maintains its current structure with the following slabs:
- Basic exemption limit: ₹4 lakh (no tax)
- ₹4 lakh to ₹8 lakh: 5% tax rate
- ₹8 lakh to ₹12 lakh: 10% tax rate
- ₹12 lakh to ₹16 lakh: 15% tax rate
- ₹16 lakh to ₹20 lakh: 20% tax rate
- ₹20 lakh to ₹24 lakh: 25% tax rate
- Above ₹24 lakh: 30% tax rate (highest slab)
In practical terms, this means that an individual earning approximately ₹1 lakh per month pays zero or nil tax under the new regime. Conversely, those with a monthly income exceeding ₹2 lakh fall into the highest tax bracket of 30%.
These tax slabs apply uniformly to all resident taxpayers, with no separate tax rates, slabs, or exemption limits specifically designed for senior citizens or super senior citizens under the new regime.
Old Tax Regime Slabs for FY 2026-2027
The old income tax regime has remained unchanged for several years now, to the extent that taxpayers must specifically opt for it when filing their income tax returns. If a taxpayer fails to file their ITR before the July 31 deadline, they cannot file under the old regime and will automatically be switched to the new tax regime.
While the old regime offers numerous tax exemptions and deductions, it also features higher tax rates that apply at relatively lower income levels compared to the new regime.
Old Regime Tax Structure
- Up to ₹2.5 lakh: Exempt from tax (basic exemption limit)
- ₹2.5 lakh to ₹5 lakh: 5% tax rate
- ₹5 lakh to ₹10 lakh: 20% tax rate
- Above ₹10 lakh: 30% tax rate
These rates apply to resident individuals up to 60 years of age. However, the basic exemption limit varies for senior citizens and super senior citizens under the old tax regime. For senior citizens aged 60 to 80 years, the basic exemption limit increases to ₹3 lakh, while for super senior citizens above 80 years, it rises further to ₹5 lakh.
Popular Deductions Under Old Regime
The old income tax regime continues to offer several popular tax deductions and exemptions, including:
- Standard deduction (available in both regimes, but with ₹50,000 limit in old regime compared to ₹25,000 in new regime)
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Section 80C deductions (covering PPF, Provident Fund, equity mutual funds, NPS with additional ₹50,000 exemption)
- Section 80D for medical insurance
- Section 80TTA for bank interest
- Section 80G for donations and charity
- Home Loan Interest Benefit
The unchanged tax slabs for FY 2026-2027 provide stability and predictability for taxpayers, allowing them to plan their finances accordingly. With the new tax regime remaining the default option and the old regime requiring specific opt-in, taxpayers must carefully evaluate which system works best for their financial situation based on available deductions and applicable tax rates.
