Income tax slabs for AY 2027-28

The income tax slabs for assessment year 2027-28 are the rates charged on income earned in the financial year 2026-27, imposed by Section 3(1) of the Finance Act, 2026 under the Income-tax Act, 2025: seven new-regime slabs running from nil up to Rs. 4 lakh to 30% above Rs. 24 lakh in the Table to Section 202(1), and four old-regime slabs from nil up to Rs. 2.5 lakh in Paragraph A of Part I-B of the First Schedule. Both tables stand where they stood a year earlier.

The rates did not move. The law under them did. The financial year 2026-27 is the first tax year assessed under the Income-tax Act, 2025, which came into force on 1 April 2026 and repealed the Income-tax Act, 1961, and the Finance Act, 2026 (No. 4 of 2026, which received assent on 30 March 2026) charges tax twice over to manage the changeover: Section 2 for the assessment year commencing 1 April 2026 under the old Act, Section 3 for the tax year commencing 1 April 2026 under the new one. A central government employee filing for 2026-27 is charged by Section 3, and any figure sourced to the 1961 Act for this year is sourced to a repealed statute.

One provision did change. Section 56 of the Finance Act, 2026 omitted sub-clause (iii) of Section 202(2)(a) with effect from 1 April 2026, lifting the bar on the Special Economic Zone deduction in Section 144 for a person in the new regime. It reaches an SEZ entrepreneur and no one on a pay matrix cell.

The law that charges tax for the tax year 2026-27

Section 3(1) of the Finance Act, 2026 is the charging provision for assessment year 2027-28. It reads that for the tax year commencing on the 1st day of April, 2026, income-tax shall be charged under the provisions of the Income-tax Act, 2025 at the rates specified in Part I-B of the First Schedule, and that such tax shall be increased by a surcharge calculated in the manner provided there.

That leaves the Finance Act, 2026 with two charging sections running side by side, which is unusual and is the most common source of a wrong citation this year. Section 2 charges tax for the assessment year commencing 1 April 2026, meaning income of the financial year 2025-26, under the Income-tax Act, 1961 at the rates in Part I-A of the First Schedule. Section 3 charges the tax year 2026-27 under the Income-tax Act, 2025 at Part I-B rates. Two different years, two different statutes, two different Parts of the same Schedule.

The split matters for a second reason. Under the 1961 Act, Part I of a Finance Act carried the rates for the assessment year just ending and Part III carried the rates for deducting tax from salary in the year about to begin, so the two never described the same period. Under the 2025 Act the tax year is the year in which income is earned, so Part I-B and Part III of the Finance Act, 2026 both govern 2026-27. A Form 16 for 2026-27 and the return for assessment year 2027-28 are worked on the same rates.

New regime slabs for the tax year 2026-27

The new tax regime applies by default. Section 202(1) of the Income-tax Act, 2025 computes the tax of an individual, Hindu undivided family, association of persons, body of individuals or artificial juridical person at the rates in its own Table unless the person exercises the option under Section 202(4). The slab table is in the Act itself, not in the Finance Act, which is a change from the 1961 Act where Section 115BAC(1A) had to be read with the Finance Act schedule.

Table to Section 202(1), Income-tax Act, 2025, as it stands for the tax year 2026-27.

Age makes no difference here. A pensioner of 82 and a probationer of 24 are charged on the same seven rows, so the higher exemptions a senior citizen has always had exist only on the other side of the choice. The cumulative tax at the top of each band is worth carrying: Rs. 20,000 at Rs. 8 lakh, Rs. 60,000 at Rs. 12 lakh, Rs. 1,20,000 at Rs. 16 lakh, Rs. 2,00,000 at Rs. 20 lakh and Rs. 3,00,000 at Rs. 24 lakh, before the rebate and before the 4% cess.

Old regime slabs for the tax year 2026-27

The old tax regime has to be chosen, and its rates live in Paragraph A of Part I-B of the First Schedule to the Finance Act, 2026. Item (I) of that Paragraph covers an individual below 60, and it is the table most readers mean by the old regime.

Paragraph A(I), Part I-B, First Schedule, Finance Act, 2026.

Items (II) and (III) of the same Paragraph raise the exemption by age, and this is where a government pensioner should look. A resident aged 60 to 79 at any time during the tax year pays nil up to Rs. 3 lakh, then 5% to Rs. 5 lakh, then Rs. 10,000 plus 20% to Rs. 10 lakh, then Rs. 1,10,000 plus 30%. A resident aged 80 or above pays nil up to Rs. 5 lakh, then 20% to Rs. 10 lakh, then Rs. 1,00,000 plus 30%.

Read item (III) closely, because it is not simply the younger table with a bigger first row. There is no 5% band for a super-senior citizen at all. Income crosses straight from nil to 20% at Rs. 5 lakh, which means the marginal rate on the first rupee of taxable income for an 80-year-old is four times the marginal rate for a 61-year-old, even though the 80-year-old pays nothing on a much larger slice below.

Rebate under Section 156 and the zero-tax lines

Neither slab table describes the income at which tax actually starts, because the rebate moves that point well above the first row. The rebate that stood in Section 87A of the 1961 Act is now Section 156 of the Income-tax Act, 2025, and it carries two separate limbs.

Section 156(1) covers the old regime. A resident individual is entitled to a deduction of 100% of the income-tax payable or Rs. 12,500, whichever is less, where total income does not exceed Rs. 5 lakh. Section 156(2)(a) covers a resident individual whose income is chargeable under Section 202(1), the new regime, and allows 100% of the income-tax payable or Rs. 60,000, whichever is less, where total income does not exceed Rs. 12 lakh.

The standard deduction sits before all of this. Serial 2 of the Table in Section 19(1) of the Income-tax Act, 2025 allows Rs. 75,000 or the salary, whichever is less, where the income is charged under Section 202(1), and Rs. 50,000 or the salary, whichever is less, in any other case. It applies to pension as much as to salary, because Section 16(b) brings pension within the head Salaries.

Putting the two together gives the working thresholds for the tax year 2026-27. In the new regime a salary or pension of Rs. 12.75 lakh reduces to Rs. 12 lakh of total income and attracts no tax at all. In the old regime the same arithmetic reaches only about Rs. 5.5 lakh for a person below 60, Rs. 5.5 lakh again for a senior citizen whose Rs. 3 lakh exemption is overtaken by the Rs. 5 lakh rebate ceiling, and Rs. 5.5 lakh for a super-senior citizen. The gap between Rs. 12.75 lakh and Rs. 5.5 lakh is the entire argument for the new regime for most government employees.

One limit is easy to miss. Section 156(3) provides that the deduction under Section 156(2) shall not exceed the income-tax payable at the rates provided in Section 202(1). Tax charged at a special rate, such as long-term capital gains under Chapter XIII, is outside those rates, so the rebate cannot cancel it. A pensioner with Rs. 11 lakh of total income including a capital gain pays tax on the gain even though the slab tax on the rest disappears.

Marginal relief above Rs. 12 lakh

Section 156(2)(b) stops the Rs. 12 lakh line from behaving like a cliff. Slab tax at exactly Rs. 12 lakh of total income is Rs. 60,000, and Section 156(2)(a) cancels every rupee of it. Without a further provision, one extra rupee of income would trigger Rs. 60,000 of tax.

Section 156(2)(b) provides that where total income exceeds Rs. 12 lakh and the income-tax payable exceeds the amount by which total income exceeds Rs. 12 lakh, the assessee gets a deduction equal to that difference. The practical effect is that tax is limited to the excess over Rs. 12 lakh. At a total income of Rs. 12,10,000 the slab tax is Rs. 61,500, marginal relief brings it down to Rs. 10,000, and the 4% cess takes it to Rs. 10,400.

The relief runs out at a total income of Rs. 12,70,588. Above Rs. 12 lakh the next band is charged at 15%, so the slab tax is Rs. 60,000 plus 15% of the excess, and relief applies only while that figure is larger than the excess itself. Setting the two equal gives an excess of Rs. 70,588, which is the crossover. From Rs. 12,70,589 upward the ordinary slab computation is already the lower number and Section 156(2)(b) does nothing.

A separate marginal relief operates at each surcharge threshold, on a different formula. Section 3(5) of the Finance Act, 2026 sets it as Tn = Rn + Sn in the default regime, and Paragraph F of Part I-B, Table 2 as Wn = Un + Vn in the old regime; each caps the total of income-tax and surcharge by reference to the tax at the threshold plus the income above it. The two reliefs are not variants of one rule and are not interchangeable in a computation. Marginal relief treats them separately.

Deductions that survive in the new regime

Section 202(2)(a) lists what a person taxed under Section 202(1) must compute total income without, and the list is long. It removes most of Schedule III, serial 1 of the Section 19(1) Table, the interest deduction in Section 22(1)(b) for properties within Section 21(6), Sections 33(8), 45(3), 46, 47(1)(a), 48 and 49, and the whole of Chapter VIII apart from four named provisions.

Those four are the ones that matter to a central government employee, because they are the only deductions from Chapter VIII left standing:

• Section 124(1) and Section 124(2), the employer’s contribution to the National Pension System. Section 124(1)(a) allows the whole employer contribution up to 14% of salary where the employer is the Central Government or a State Government, and Section 124(2) raises the non-government limit from 10% to 14% for a person taxed under Section 202(1).
• Section 125(2), the Central Government’s contribution to the Agniveer Corpus Fund for a person enrolled in the Agnipath Scheme.
• Section 146, the deduction for additional employee cost in a business, which does not reach a salaried employee.

Everything else in Chapter VIII is gone. The Rs. 50,000 additional NPS deduction that stood in Section 80CCD(1B) of the 1961 Act is Section 124(3), which is not among the preserved sub-sections, so it is an old-regime deduction only. Life insurance, provident fund and pension contributions under Section 123 read with Schedule XV, health insurance under Section 126, and the senior-citizen interest deduction under Section 153(2)(b) all fall away.

Two salary deductions complete the picture. The standard deduction at serial 2 of the Section 19(1) Table survives at Rs. 75,000. The professional tax deduction at serial 1 does not, because Section 202(2)(a)(iv) strikes that serial out. So the whole new-regime deduction set for a serving central government employee is the Rs. 75,000 standard deduction plus the employer’s 14% NPS contribution, and nothing more.

Deductions available only in the old regime

Choosing the old regime under Section 202(4) restores the full catalogue, which is why the choice can still go the other way at higher incomes with large committed outgoings. The main items for a government employee are Section 123 read with Schedule XV, covering life insurance premium, provident fund and the employee’s own pension contribution up to Rs. 1.5 lakh; Section 124(3), the additional Rs. 50,000 for a National Pension System subscriber; Section 126, health insurance, capped at Rs. 50,000 in aggregate for a senior citizen by Section 126(4); the house-rent allowance exemption; home-loan interest; and Section 153(2)(b), which gives a senior citizen up to Rs. 50,000 of deposit interest.

One old-regime deduction that a government employee used to have is gone from both sides. The Income-tax Act, 2025 enacts no counterpart to the entertainment allowance deduction that Section 16(ii) of the 1961 Act gave to a government servant, so it is unavailable for the tax year 2026-27 whichever regime is chosen. That is a repeal by the new Act, not a Finance Act, 2026 change, and it is the one place where the transition genuinely costs a central government employee money.

Surcharge and cess

Surcharge is charged on the slab tax before cess, and the ladder differs by regime. Paragraph F of Part I-B of the First Schedule to the Finance Act, 2026 sets the old-regime rates for an individual at 10% where total income exceeds Rs. 50 lakh but not Rs. 1 crore, 15% above Rs. 1 crore, 25% above Rs. 2 crore and 37% above Rs. 5 crore, with the last two bands measured on total income excluding dividend income and capital gains under Sections 196, 197 and 198.

Where income is chargeable under Section 202, the Table at Section 3(4)(b) serial 10 of the Finance Act, 2026 runs 10%, 15% and 25%, and stops. There is no 37% band in the new regime. That single missing row is what produces the familiar contrast in effective top rates: 30% raised by 37% surcharge and 4% cess gives 42.744% in the old regime, while 30% raised by 25% and 4% gives 39% in the new. Surcharge on the dividend and capital-gains component is capped at 15% under both ladders.

For a serving central government employee this section is mostly theoretical. The highest cell in the pay matrix is Rs. 2,50,000 a month at Level 18, and with dearness allowance at 60% from 1 January 2026 under Department of Expenditure OM No. 1/1(i)/2026-E.II(B) dated 22 April 2026, that comes to Rs. 4,00,000 a month, or Rs. 48,00,000 a year. The Cabinet Secretary’s pay does not reach the Rs. 50 lakh surcharge threshold. Surcharge arrives through capital gains, rent or a spouse’s business, not through the pay matrix.

The health and education cess reaches everyone. Section 3(15) of the Finance Act, 2026 charges 4% on the income-tax as increased by any surcharge, and Section 3(16) applies the same 4% to tax deducted at source and to advance tax. There is no exempt slab and no exempt assessee, so the Rs. 10,000 left standing after marginal relief still carries Rs. 400 of cess.

Worked example: a serving employee at Rs. 14 lakh

Take a central government employee whose gross salary for the financial year 2026-27 is Rs. 14,00,000, on which the employer contributes Rs. 1,20,000 to the National Pension System.

In the new regime the only deductions are the Rs. 75,000 standard deduction at serial 2 of the Section 19(1) Table and the Rs. 1,20,000 employer contribution under Section 124(1)(a), which is inside the 14% limit. Total income is Rs. 12,05,000. Slab tax is Rs. 60,000 on the bands up to Rs. 12 lakh plus 15% of Rs. 5,000, that is Rs. 750, giving Rs. 60,750. Section 156(2)(b) limits the tax to the Rs. 5,000 by which income exceeds Rs. 12 lakh, and 4% cess brings the bill to Rs. 5,200.

Now assume the same employee in the old regime claims Rs. 50,000 standard deduction, Rs. 1,50,000 under Section 123, Rs. 50,000 under Section 124(3), Rs. 25,000 under Section 126 and a house-rent allowance exemption of Rs. 1,80,000. Total income falls to about Rs. 8,45,000. The tax is Rs. 12,500 on the Rs. 2.5 lakh to Rs. 5 lakh band plus 20% of Rs. 3,45,000, that is Rs. 69,000, giving Rs. 81,500, and 4% cess adds Rs. 3,260 for a bill of about Rs. 84,760.

Rs. 5,200 against Rs. 84,760 is the ordinary result once the Rs. 12 lakh line is in play, and the gap is created almost entirely by marginal relief rather than by the rate difference. Move the gross salary to Rs. 15,00,000 and the new-regime total income becomes Rs. 13,05,000, past the Rs. 12,70,588 crossover, so the full slab tax of Rs. 60,000 plus 15% of Rs. 1,05,000 applies: Rs. 75,750 plus cess, about Rs. 78,780. The new regime is still cheaper, but by a few thousand rupees rather than by an order of magnitude. Anyone reasoning from the Rs. 14 lakh case alone will overestimate the benefit.

Worked example: a pensioner aged 68

A retired officer draws a basic pension of Rs. 45,000 a month with dearness relief at 60%, giving Rs. 72,000 a month or Rs. 8,64,000 for the year, and earns Rs. 1,20,000 of interest on deposits. Gross income is Rs. 9,84,000.

New regime: the Rs. 75,000 standard deduction applies to pension, leaving a total income of Rs. 9,09,000. Slab tax is Rs. 20,000 on the Rs. 4 lakh to Rs. 8 lakh band plus 10% of Rs. 1,09,000, that is Rs. 10,900, so Rs. 30,900. Total income is below Rs. 12 lakh, so Section 156(2)(a) allows the lesser of the whole tax and Rs. 60,000, cancelling it. The tax is nil, and no cess arises because there is no tax to charge it on.

Old regime, with the deductions a pensioner of this age typically has: Rs. 50,000 standard deduction, Rs. 50,000 of deposit interest under Section 153(2)(b), Rs. 1,50,000 under Section 123 and Rs. 50,000 of health insurance under Section 126 gives a total income of Rs. 6,84,000. On the item (II) table for a resident aged 60 to 79 the tax is Rs. 10,000 up to Rs. 5 lakh plus 20% of Rs. 1,84,000, that is Rs. 36,800, giving Rs. 46,800, and cess adds Rs. 1,872 for Rs. 48,672.

The old regime loses by Rs. 48,672 here despite Rs. 3 lakh of deductions and the higher age-based exemption, because the Rs. 12 lakh rebate ceiling in the new regime is worth more than every deduction combined at this income. A senior citizen only reaches the point where the old regime competes when total income after deductions climbs past roughly Rs. 12 lakh, which for a pensioner usually means substantial rent or capital gains alongside the pension.

Tax deducted at source and advance tax for 2026-27

The same rates govern collection during the year. Section 3(10)(ii) of the Finance Act, 2026 charges income-tax deducted from income under the head Salaries under Section 392 of the Income-tax Act, 2025 at the rates in Part III of the First Schedule, and Section 3(10)(iv) applies Part III to advance tax payable under Chapter XIX-C. Part III is headed rates for charging income-tax in certain cases, deducting income-tax from income chargeable under the head Salaries and computing advance tax.

Because the 2025 Act assesses the tax year itself, Part I-B and Part III describe the same twelve months. Under the 1961 Act they never did, and a drawing and disbursing officer deducting tax in April 2026 was working from a Part III table for a year whose Part I table would only appear in the next Finance Act. That mismatch is gone.

A pensioner without salary TDS should still watch the advance tax instalments, because Section 3(16) applies the 4% cess to advance tax and an instalment computed without it falls short by 4%. A pension paid by a bank is treated as salary for deduction, since Section 15(2) treats the former employer as an employer and Section 16(b) brings pension within the head, so most pensioners see the deduction on the pension itself rather than paying advance tax.

Choosing and switching regime for AY 2027-28

The new regime applies unless the option in Section 202(4) is exercised, and how that option works depends on whether the person has business income. Section 202(4)(b) lets a person with no income from business or profession exercise the option along with the return of income furnished under Section 263(1), which makes it an annual choice. A salaried employee or a pensioner can therefore be in the new regime for assessment year 2026-27 and the old regime for 2027-28, and back again the year after, with nothing more than the choice made in the return.

Section 202(4)(a) is stricter for a person with business or profession income. The option must be exercised on or before the due date under Section 263(1), it applies to subsequent tax years once exercised, it may be withdrawn only once, and after withdrawal the person is never again eligible to exercise it unless the business income ceases altogether. A government employee with professional receipts on the side falls into this stricter path, which is worth knowing before the first opt-out rather than after.

The arithmetic behind the choice is the same every year. Compute the total income both ways, apply the rebate on each, and compare. The threshold at which the old regime overtakes the new rises with the deduction set, and for a serving employee it is usually somewhere above Rs. 4 lakh of combined Section 123, Section 124(3), Section 126, house-rent allowance and home-loan interest claims. The mechanics of the election are in how to switch tax regime and Form 10-IEA, and the income-tax calculator runs both sides.

Related Articles

• Tax regime break-even: when the old regime wins
• New tax regime
• Old tax regime
• Old versus new tax regime
• Section 115BAC
• Section 202 of the Income-tax Act 2025
• Income-tax Act 2025
• Finance Act 2026
• The tax year replaces the previous year and assessment year
• Section 87A rebate
• Standard deduction
• Marginal relief on income tax
• Surcharge on income tax
• Health and education cess
• How to switch tax regime
• Form 10-IEA
• Deductions allowed in the new tax regime
• Section 80C
• Section 80D
• Section 80TTB
• HRA exemption under Section 10(13A)
• Home-loan interest under Section 24(b)
• NPS tax benefits
• National Pension System
• Capital gains tax
• Income tax for government employees
• Income tax for pensioners
• Senior citizen tax
• Professional tax
• Form 16
• TDS on salary
• Advance tax
• Pay matrix
• Dearness allowance
• Dearness relief
• Income-tax calculator
• Central government employees in India

External references

• Income Tax Department: e-filing portal
• Income Tax Department: Income-tax Act, 2025
• Finance Act, 2026 (No. 4 of 2026), gazette copy
• Central Board of Direct Taxes
• Department of Revenue, Ministry of Finance
• Department of Expenditure, Ministry of Finance

References

1. Finance Act, 2026 (No. 4 of 2026, assent 30 March 2026), Section 3(1): income-tax charged for the tax year commencing 1 April 2026 under the Income-tax Act, 2025 at the rates in Part I-B of the First Schedule, increased by surcharge. Section 2 charges the assessment year commencing 1 April 2026 under the Income-tax Act, 1961 at Part I-A rates.
2. Income-tax Act, 2025, Section 202(1) and its Table: the new-regime slab rates, nil up to Rs. 4,00,000 rising to 30% above Rs. 24,00,000; Section 202(2)(a) for the excluded exemptions and deductions, and Section 202(4) for the option to leave the regime.
3. Finance Act, 2026, First Schedule, Part I-B, Paragraph A: item (I), the old-regime rates for an individual below 60; item (II), the Rs. 3 lakh exemption for a resident aged 60 to 79; item (III), the Rs. 5 lakh exemption for a resident aged 80 or above, with no 5% band.
4. Income-tax Act, 2025, Section 156: sub-section (1), the Rs. 12,500 rebate up to a total income of Rs. 5,00,000; sub-section (2)(a), the Rs. 60,000 rebate up to Rs. 12,00,000 where income is chargeable under Section 202(1); sub-section (2)(b), marginal relief; sub-section (3), the cap by reference to Section 202(1) rates.
5. Income-tax Act, 2025, Section 19(1) Table: serial 2, the standard deduction of Rs. 75,000 or the salary whichever is less where income is charged under Section 202(1), and Rs. 50,000 in any other case; serial 1, the professional tax deduction, removed from the new regime by Section 202(2)(a)(iv).
6. Income-tax Act, 2025, Section 124(1)(a), the employer’s National Pension System contribution up to 14% of salary for a Central or State Government employer, and Section 124(2); Section 124(3), the additional Rs. 50,000, which Section 202(2)(a)(xii) does not preserve.
7. Finance Act, 2026, Section 56: sub-clause (iii) of Section 202(2)(a) of the Income-tax Act, 2025 omitted with effect from 1 April 2026. Before omission it read “section 144”, the Special Economic Zone deduction.
8. Finance Act, 2026, First Schedule, Part I-B, Paragraph F, Table 1, serial 1, the old-regime surcharge rates of 10%, 15%, 25% and 37%; and Section 3(4)(b), Table serial 10, the surcharge rates where income is chargeable under Section 202, which stop at 25%.
9. Finance Act, 2026, Section 3(5), marginal relief on the default-regime surcharge by the formula Tn = Rn + Sn, and First Schedule, Part I-B, Paragraph F, Table 2, the old-regime relief by Wn = Un + Vn; Section 3(15), the 4% health and education cess; Section 3(16), the same cess on tax deducted at source and advance tax.
10. Finance Act, 2026, Section 3(10)(ii) and Section 3(10)(iv), read with Part III of the First Schedule: the rates for deducting tax from income under the head Salaries under Section 392 of the Income-tax Act, 2025 and for computing advance tax under Chapter XIX-C.
11. Department of Expenditure Office Memorandum No. 1/1(i)/2026-E.II(B) dated 22 April 2026: dearness allowance to central government employees at 60% of basic pay with effect from 1 January 2026.