Income tax slabs FY 2026-2027
What will be the income tax slabs for FY 2026-2027 after the Budget? Will there be any changes? Under the current new tax regime, income up to Rs 4 lakh is exempt, setting the basic exemption limit at Rs 4 lakh. Many taxpayers are seeking an increase in this threshold to ease the overall tax burden and simplify compliance.
Income between Rs 4 lakh and Rs 8 lakh is taxed at 5%, while earnings in the Rs 8 lakh to Rs 12 lakh range attract a 10% rate.
Income from Rs 12 lakh to Rs 16 lakh is taxed at 15%, which rises to 20% for income between Rs 16 lakh and Rs 20 lakh, and further to 25% for income in the Rs 20 lakh to Rs 24 lakh bracket.
Any income exceeding Rs 24 lakh is taxed at 30%, the highest slab rate under the new income tax regime. Salaried taxpayers have been calling for the 30% tax threshold to be pushed up to Rs 30 lakh.
Section 87A rebate
Currently, income up to Rs 12 lakh – Rs 12.75 lakh in the case of salaried individuals – is effectively tax-free after accounting for the Section 87A rebate. Tax experts believe this rebate threshold could be raised to Rs 15 lakh. Additionally, a big number of taxpayers continue to opt for the old tax regime and are seeking lower tax rates and a higher basic exemption limit under that system as well.
Standard deduction
Standard deduction allows for a simple deduction with no need for paperwork or furnishing proofs. It is a deduction available for salaried taxpayers. However, the limit for standard deduction varies between the old and the new income tax regime.
Those under the old income tax regime can avail Rs 50,000 standard deduction, while those under the new income tax regime have the advantage of Rs 75,000 standard deduction. Tax experts feel that there is scope to further increase the standard deduction, particularly under the new tax regime, which provides very limited deductions and exemptions.
Home loan interest
Under the old tax regime, individuals can claim a deduction on interest paid on a home loan. For a self-occupied residential property, interest payments of up to Rs 2 lakh per year, or the actual interest paid if lower, can be deducted from taxable income. Tax experts suggest that extending this benefit to the new tax regime could provide a meaningful boost to the housing sector.
Section 80C
Section 80C remains one of the most widely used deductions under the old tax regime, but its Rs 1.5 lakh limit has not been revised for several years. This deduction covers investments in instruments such as provident fund, public provident fund (PPF), mutual funds and other common savings avenues. Experts feel that to encourage higher savings, the limit should be increased and the benefit should also be made available under the new tax regime to promote its wider adoption.
