Tax slabs FY 2026–27: What Budget 2026 changed for individual taxpayers and which regime works best

Finance Minister Nirmala Sitharaman unveiled a raft of tax measures in her Budget 2026 speech in Parliament on Sunday, February 1. While presenting her ninth consecutive Union Budget, she announced changes to Income Tax Return (ITR) filing timelines and introduced a rule-based, automated compliance framework aimed at easing the burden on small taxpayers, among other proposals. However, she chose to keep the tax slabs under the old and new tax regimes unchanged for financial year 2026-27. 

Budget 2026: New Income Tax Act 2025, TDS-TCS overhaul and compliance relief headline sweeping tax reforms

What are your tax slabs now

For Financial Year 2026–27 (Assessment Year 2027–28), the new income tax regime continues as the default structure. It offers a basic exemption limit of Rs 4 lakh, with tax rates rising in 5-percentage-point steps and peaking at 30% for incomes above Rs 24 lakh. The key slabs remain unchanged, as the February 2026 Budget did not announce any revisions to the rate structure.

New Tax Regime Slabs (FY 2026–27 / AY 2027–28)

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

Old Tax Regime Slabs (FY 2026–27)

Under the old tax regime, income tax rates continue to vary by age category, with higher basic exemption limits for senior and super senior citizens.

Individuals below 60 years Income up to Rs 2.5 lakh is exempt from tax. Income between Rs 2.5 lakh and Rs 5 lakh is taxed at 5%, while income between Rs 5 lakh and Rs 10 lakh attracts a 20% tax rate. Any income above Rs 10 lakh is taxed at 30%.

Senior citizens (60 to 79 years) For senior citizens, income up to Rs 3 lakh is exempt. The slab of Rs 3 lakh to Rs 5 lakh is taxed at 5%, income between Rs 5 lakh and Rs 10 lakh at 20%, and income exceeding Rs 10 lakh at 30%.

Super senior citizens (80 years and above) Super senior citizens enjoy a higher basic exemption limit of Rs 5 lakh. Income from Rs 5 lakh to Rs 10 lakh is taxed at 20%, while income above ₹10 lakh continues to be taxed at 30%.

Deciding on tax regimes

The Union Budget 2026 spotlights a significant choice for taxpayers: deciding between the old and new tax regimes. With changing tax slabs and evolving deduction rules, selecting the right option can influence not only immediate tax liability but also long-term financial security. Taxpayers must weigh the benefits of traditional deductions under the old regime against the simplified structure of the new regime. The Budget’s policy direction further encourages individuals to use income tax calculators, which clarify potential outcomes and help users compare both systems quickly, making the process more transparent and accessible.

The income tax slabs were kept unchanged from Budget 2025. The tax slabs last year were tweaked to tax higher incomes at progressively higher rates while offering relief to lower- and middle-income earners. Under the new tax regime for 2025, individuals can choose a simplified structure with lower slab rates and fewer exemptions, making it easier to understand and compute taxes.

A key feature of the new regime is the rebate under Section 87A, which effectively reduces tax liability to zero for individuals with income up to Rs 12 lakh, subject to conditions. Salaried taxpayers also benefit from a standard deduction of Rs 75,000, pushing the effective tax-free income to ₹12.75 lakh.

In contrast, the old tax regime follows higher rates but allows multiple deductions and exemptions, such as those under Sections 80C, 80D and housing loan interest. Taxpayers must compare both regimes carefully, as the new regime generally favours those with fewer deductions, while the old regime may suit individuals with substantial tax-saving investments.

Deductions and exemptions

Deductions and exemptions continue to define the core difference between the old and new regimes. The old regime allows for various deductions, such as Section 80C investments, home loan repayments, health insurance premiums, and National Pension Scheme (NPS) contributions. In contrast, the new regime offers reduced tax rates but limits most deductions and exemptions. Comparing the two, taxpayers must calculate whether the benefits of claiming deductions under the old regime exceed the potential savings from the new regime’s lower rates.

A step-by-step approach is encouraged for optimal tax planning. First, taxpayers enter their age, residential status, and income sources into an online calculator. By toggling between regimes, individuals can review the tax implications of their investment decisions.