Every January, HR departments across India send the same email: please declare your tax regime and investment proofs by the 15th. And every January, a great many people open a spreadsheet, or a calculator, or a colleague's WhatsApp forward, and try to work out whether ₹1.5 lakh of investments is still worth making.
For tax year 2026-27 the question is the same, but it is asked under a new Act. The new regime is now section 202 of the Income-tax Act, 2025, and it is still the default. Section 80C has become section 123. For most salaried people the answer has moved decisively in one direction, but not for everyone.
The new regime, and why it is the default
Section 202(1) applies to every individual and HUF unless they opt out. Its slabs are:
- up to ₹4 lakh: nil
- ₹4 to 8 lakh: 5%
- ₹8 to 12 lakh: 10%
- ₹12 to 16 lakh: 15%
- ₹16 to 20 lakh: 20%
- ₹20 to 24 lakh: 25%
- above ₹24 lakh: 30%
Two provisions make it generous at the bottom:
- A ₹75,000 standard deduction on salary, under section 19(1).
- A rebate of up to ₹60,000 under section 156(2), which wipes out the tax completely where total income is not more than ₹12 lakh. Just above ₹12 lakh, marginal relief means the tax can never be more than the income above ₹12 lakh.
So a salary of ₹12,75,000 pays no tax at all under the new regime.
What the new regime takes away
Section 202(2) computes income without most of the familiar deductions:
- section 123, the old 80C;
- section 126, the old 80D, for health insurance;
- interest on a home loan for a self-occupied house;
- professional tax;
- almost everything else in Chapter VIII.
What it keeps is short: the standard deduction, the family pension deduction, and the employer's contribution to NPS, which section 124(2) allows at 14% of salary under the new regime. Under the old, section 124(1) allows 10% for a private employer and 14% for the Central or a State Government.
Where 80C went
Section 80C, together with 80CCC and 80CCD(1), is now section 123, still capped at ₹1,50,000. The list of what qualifies has moved to Schedule XV, and it is the familiar list: life insurance premiums, PPF, the employee's provident fund, ELSS, tuition fees for up to two children, principal repayment on a home loan, five-year bank and post office deposits, the Senior Citizens' Savings Scheme, NSC, Sukanya-type schemes, and NPS contributions.
Section 80D is now section 126, and home-loan interest on a self-occupied house is section 22(2), capped at ₹2,00,000. All three are available only in the old regime.
The old regime, for those who stay
The old-regime rates aren't in the Act. They are set each year in the Finance Act's First Schedule. For tax year 2026-27 they are unchanged: nil up to ₹2.5 lakh (₹3 lakh from 60 to 79, ₹5 lakh from 80), 5% to ₹5 lakh, 20% to ₹10 lakh, and 30% above that. The standard deduction is ₹50,000, and the rebate is ₹12,500, up to a total income of ₹5 lakh.
The old regime is now a calculation, not a habit. It wins only when the deductions are large enough to beat a ₹12 lakh zero-tax line and lower slabs.
Choose
Old regime or new, for tax year 2026-27?
For a salaried resident individual. A sample is loaded; replace it with your own.
The new regime saves ₹1,50,800
Including 4% cess. If you have business income, choosing the old regime is a decision that is hard to reverse; see the article.
Income-tax Act, 2025, sections 19, 22, 123, 124, 126, 156 and 202; old-regime rates from the Finance Act, 2026, First Schedule. Nothing you type leaves this page.
Switching, and the one-way door for business income
- Salaried, with no business income: the choice is made each year, in that year's return filed by the due date under section 263(1), under section 202(4)(b). Rule 136 of the 2026 Rules says the option is exercised in that return itself. A belated return cannot carry it.
- With business or professional income: the option to leave the new regime must be exercised by the return's due date under section 202(4)(a). Once made, it continues for later years. It can be withdrawn only once, and after that the person can never opt out again unless they stop having business income.
Telling your employer your choice only decides how much tax is deducted each month. The regime you are finally assessed under is the one you choose in the return.
Where this comes from
The law is the Income-tax Act, 2025 as amended by the Finance Act, 2026: sections 19, 22, 93, 123, 124, 126, 155, 156 and 202, and Schedule XV. The old-regime slabs are in the First Schedule to the Finance Act, 2026. Rule 136 of the Income-tax Rules, 2026 deals with exercising the option. Figures are for resident individuals and exclude surcharge, which starts above ₹50 lakh of income.
Questions this answers
What are the new tax regime slabs for FY 2026-27?
Under section 202(1): nil up to ₹4 lakh, 5% to 8 lakh, 10% to 12 lakh, 15% to 16 lakh, 20% to 20 lakh, 25% to 24 lakh and 30% above ₹24 lakh.
Is income up to ₹12 lakh tax-free under the new regime?
Yes, for a resident individual: the section 156(2) rebate of up to ₹60,000 covers the tax where total income does not exceed ₹12 lakh. With the ₹75,000 standard deduction, a salary of ₹12,75,000 pays no tax.
What is the new section for 80C?
Section 123 of the Income-tax Act, 2025, with the eligible investments listed in Schedule XV and the same ₹1,50,000 limit.
Can I claim 80C in the new tax regime?
No. Section 202(2) excludes section 123 (80C) and section 126 (80D). The employer's NPS contribution under section 124 is still allowed, at 14% of salary.
Can I switch between regimes every year?
Yes, if you have no business or professional income: the choice is made in each year's return, filed by the due date. With business income, the option can be withdrawn only once.
Look up any section
The Income-tax Act 2025 section finder lists every 1961 TDS and TCS section with its 2025 section and Table serial, the rate and threshold as enacted, and the page of the Act, with a TDS rate chart and a TCS rate chart.
Read next
- Advance Tax Under the Income-tax Act, 2025: The Four Dates, the Safe Harbours, and What a Missed December Costs
- Capital Gains Under the Income-tax Act, 2025: The Rates, Where Sections 54 and 54F Went, and Why Buybacks Changed Again
- Section 194Q in the Income-tax Act, 2025: Now Serial 8(ii) of Section 393(1), and the Two Tests Behind It