Assessment Year 2026-27 covers income earned during Financial Year 2025-26 (1st April 2025 to 31st March 2026). The Union Budget 2025 introduced significant changes to the new tax regime — including revised slabs, a higher basic exemption limit, and an enhanced rebate under Section 87A. This guide covers everything you need to know to plan your taxes and file your ITR for AY 2026-27.
The New Tax Regime is the default regime from AY 2024-25 onwards. To opt for the Old Tax Regime (with deductions like 80C, HRA, etc.), you must explicitly choose it while filing your ITR or by submitting Form 10-IEA (for business/profession income).
New Tax Regime — Slabs for AY 2026-27
The Union Budget 2025 revised the new tax regime slabs significantly, making it more attractive for a wider range of taxpayers:
| Total Income (₹) | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Section 87A Rebate (New Regime): If your total income does not exceed ₹12,00,000, the tax liability is fully offset by the rebate under Section 87A — making the effective tax payable NIL. For salaried individuals, the standard deduction of ₹75,000 means no tax up to ₹12,75,000.
Old Tax Regime — Slabs for AY 2026-27
The old tax regime slabs remain unchanged. However, it allows a wide range of deductions and exemptions:
| Total Income (₹) | Below 60 Years | Senior Citizen (60–80) | Super Senior (80+) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001 – ₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 – ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Section 87A rebate under the old regime: Tax is fully rebated if total income does not exceed ₹5,00,000 (rebate up to ₹12,500).
Surcharge Rates for AY 2026-27
| Total Income | Surcharge Rate |
|---|---|
| Up to ₹50 lakh | Nil |
| ₹50 lakh – ₹1 crore | 10% |
| ₹1 crore – ₹2 crore | 15% |
| ₹2 crore – ₹5 crore | 25% (old regime) / 25% (new regime) |
| Above ₹5 crore | 37% (old regime) / 25% (new regime — capped) |
Health and Education Cess: 4% on (tax + surcharge) for all taxpayers.
Key Deductions Under the Old Tax Regime
The old regime allows numerous deductions that can significantly reduce your taxable income:
| Section | Deduction | Maximum Limit |
|---|---|---|
| 80C | LIC, PPF, ELSS, NSC, home loan principal, tuition fees, etc. | ₹1,50,000 |
| 80CCD(1B) | Additional NPS contribution | ₹50,000 |
| 80D | Health insurance premium (self + family) | ₹25,000 (₹50,000 for senior citizens) |
| 80D | Health insurance premium (parents) | ₹25,000 (₹50,000 if parents are senior citizens) |
| 80E | Interest on education loan | No limit (for 8 years) |
| 80G | Donations to approved institutions | 50% or 100% of donation |
| 80TTA | Interest on savings bank account (non-senior) | ₹10,000 |
| 80TTB | Interest on deposits (senior citizens only) | ₹50,000 |
| 24(b) | Home loan interest (self-occupied) | ₹2,00,000 |
| 10(13A) | HRA exemption | Actual / formula-based |
| 16(ia) | Standard deduction (salaried) | ₹50,000 |
Deductions Available Under the New Tax Regime
The new regime allows only a limited set of deductions:
- Standard deduction of ₹75,000 for salaried employees and pensioners (increased from ₹50,000 in Budget 2024)
- Employer's contribution to NPS under Section 80CCD(2) — up to 14% of salary for central government employees, 10% for others
- Deduction for family pension under Section 57(iia) — ₹25,000 or 1/3rd of pension, whichever is lower
- Agniveer Corpus Fund contribution under Section 80CCH
Under the new regime, you CANNOT claim HRA, LTA, 80C, 80D, home loan interest (Section 24b), professional tax, or most other deductions. Evaluate your total deductions before choosing the regime.
New vs Old Regime: Which is Better for You?
The break-even point depends on your income level and total deductions. As a general guide:
| Income Level | Likely Better Regime | Reason |
|---|---|---|
| Up to ₹7.75 lakh (salaried) | New Regime | Zero tax after standard deduction + 87A rebate |
| Up to ₹12.75 lakh (salaried) | New Regime | Zero tax after standard deduction + 87A rebate |
| ₹12.75 lakh – ₹15 lakh | Depends on deductions | Compare both — old regime wins if deductions > ₹3.75 lakh |
| Above ₹15 lakh with high deductions | Old Regime | Large 80C + HRA + home loan interest can save more |
| Above ₹15 lakh with low deductions | New Regime | Lower slab rates outweigh limited deductions |
TDS Rates for AY 2026-27 (Key Sections)
| Section | Nature of Payment | TDS Rate | Threshold |
|---|---|---|---|
| 192 | Salary | As per slab | Basic exemption limit |
| 194A | Interest (banks/post office) | 10% | ₹50,000 (senior citizens) / ₹40,000 (others) |
| 194C | Contractor payments | 1% (individual) / 2% (others) | ₹30,000 per payment / ₹1 lakh p.a. |
| 194H | Commission / brokerage | 5% | ₹15,000 |
| 194I | Rent (land/building) | 10% | ₹2,40,000 p.a. |
| 194J | Professional / technical fees | 10% (professional) / 2% (technical) | ₹30,000 |
| 194Q | Purchase of goods | 0.1% | ₹50 lakh p.a. |
| 194S | Transfer of virtual digital assets | 1% | ₹50,000 (specified persons) / ₹10,000 (others) |
Important Changes for AY 2026-27 (Budget 2025 Highlights)
- New regime basic exemption raised to ₹4 lakh (from ₹3 lakh)
- Section 87A rebate limit raised to ₹12 lakh (from ₹7 lakh) under the new regime
- Standard deduction for salaried/pensioners increased to ₹75,000 under the new regime
- Revised new regime slabs with more granular brackets (7 slabs)
- TDS on rent (Section 194-IB) threshold increased to ₹50,000 per month (from ₹50,000 per month — no change)
- Updated Form 26AS and AIS with more pre-filled data for easier reconciliation
- Faceless assessment and appeal processes further strengthened
ITR Filing Due Dates for AY 2026-27
| Category | Due Date |
|---|---|
| Individuals, HUFs (no audit required) | 31st July 2026 |
| Businesses requiring tax audit (Section 44AB) | 31st October 2026 |
| Companies | 31st October 2026 |
| Transfer pricing cases | 30th November 2026 |
| Revised / Belated Return | 31st December 2026 |
Advance Tax Schedule for FY 2025-26
If your estimated tax liability for the year exceeds ₹10,000, you must pay advance tax in instalments:
| Instalment | Due Date | Cumulative % of Tax |
|---|---|---|
| 1st instalment | 15th June 2025 | 15% |
| 2nd instalment | 15th September 2025 | 45% |
| 3rd instalment | 15th December 2025 | 75% |
| 4th instalment | 15th March 2026 | 100% |
Interest under Section 234B (shortfall in advance tax) and Section 234C (deferment of advance tax instalments) is charged at 1% per month. Timely advance tax payments avoid these interest costs.
Capital Gains Tax for AY 2026-27
| Asset Type | Short-Term (STCG) | Long-Term (LTCG) | Holding Period for LTCG |
|---|---|---|---|
| Listed equity shares / equity MF | 20% (Section 111A) | 12.5% above ₹1.25 lakh (Section 112A) | > 12 months |
| Debt mutual funds (post Apr 2023) | Slab rate | Slab rate | N/A (always STCG) |
| Immovable property | Slab rate | 12.5% (without indexation) or 20% (with indexation — pre-Jul 2024 assets) | > 24 months |
| Unlisted shares | Slab rate | 12.5% | > 24 months |
| Gold / other assets | Slab rate | 12.5% | > 36 months |
Budget 2024 change (effective 23rd July 2024): LTCG on equity raised from 10% to 12.5%; STCG on equity raised from 15% to 20%; LTCG exemption limit raised from ₹1 lakh to ₹1.25 lakh. These rates apply for AY 2026-27.
Tax on Virtual Digital Assets (Crypto) for AY 2026-27
- Flat 30% tax on income from transfer of Virtual Digital Assets (VDAs) — no deduction except cost of acquisition
- No set-off of VDA losses against any other income
- No carry forward of VDA losses to future years
- TDS at 1% under Section 194S on VDA transactions above ₹10,000 (₹50,000 for specified persons)
- Gifts of VDAs taxable in the hands of the recipient
Tax Planning Tips for AY 2026-27
- Compare tax under both regimes using your actual income and deductions before filing
- If opting for old regime with business income, file Form 10-IEA before the due date
- Maximise NPS contribution under 80CCD(2) — available under both regimes
- Reconcile Form 26AS and AIS before filing — discrepancies trigger notices
- Claim all eligible TDS credits — verify against Form 26AS
- If you have capital gains, compute LTCG/STCG separately and apply correct rates
- Senior citizens: use 80TTB (₹50,000 interest deduction) and higher TDS thresholds
- File ITR before 31st July 2026 to avoid late fees and preserve carry-forward of losses
Tax planning for AY 2026-27 requires careful comparison of both regimes and optimal use of deductions. Our Chartered Accountants at Bhowal Associates will compute your tax under both regimes, identify every eligible deduction, and file your ITR accurately — saving you maximum tax.