Income Tax Slabs 2026: If you are a salaried employee paying income tax but are unaware of which tax slab offers the best tax benefits, this news is for you. If your annual income is up to ₹12 lakh and you are seeking tax relief, note that under the new tax regime, the tax liability on a total income of ₹12 lakh (from ordinary sources) can be zero.

Furthermore, salaried employees benefit from a standard deduction of ₹75,000, meaning no tax is payable on a salary of up to ₹12.75 lakh. However, income subject to special tax rates—such as certain capital gains—falls under different rules within this relief framework. The revised tax slabs under the new regime came into effect in the 2025-26 financial year, and according to the Income Tax Department, the same slabs apply for 2026-27 as well.

What are the new tax slabs?
The tax slabs under the new regime have been revised compared to the previous ones. Simply put, there is no tax on income up to ₹4 lakh. A 5% tax applies to income between ₹4 lakh and ₹8 lakh, while a 10% tax applies to income between ₹8 lakh and ₹12 lakh.
A 15% tax applies to income between ₹12 lakh and ₹16 lakh; 20% for income between ₹16 lakh and ₹20 lakh; and 25% for income between ₹20 lakh and ₹24 lakh. Finally, a 30% tax applies to income exceeding ₹24 lakh.

Why is there no tax on a salary of up to ₹12.75 lakh?
Salaried employees are entitled to a standard deduction of ₹75,000. Consider an employee with an annual salary of ₹12.75 lakh; after deducting the standard deduction of ₹75,000, the taxable income stands at ₹12 lakh. If other eligibility criteria are met, the tax liability can become zero due to the Section 87A rebate. For this reason, the government announced in the 2025-2026 Budget that salaried taxpayers earning up to ₹12.75 lakh would effectively pay zero tax.

Do you have to pay tax if you earn more than ₹12 lakh?

If your income exceeds ₹12 lakh, it doesn’t mean your entire income will immediately be taxed at 15% to 20%. Tax is levied according to specific tax slabs. The portion of income exceeding ₹12 lakh falls into the next slab, and the tax is calculated based on established rules. Essentially, understanding the ₹12 lakh limit—in terms of where the tax-free threshold ends and the taxable range begins—is straightforward.

What is the difference between the new and old tax regimes?

Taxpayers can choose between the old and new tax regimes, although the new regime is the default. The new tax regime features simpler tax slabs and lower tax rates, but it limits the scope for claiming various deductions and exemptions.
In contrast, the old tax regime has different tax slabs but allows taxpayers to claim numerous deductions and exemptions. Under certain circumstances, you can claim benefits such as deductions for home loan interest, Section 80C investments, and health insurance premiums. Therefore, it would be incorrect to claim that the new regime is the better choice for everyone.

The New Tax System: Who Benefits?

If your income is modest and you do not utilise tax-saving investments or deductions, the new tax system could prove highly beneficial for you. It is particularly advantageous for individuals who do not claim significant deductions, do not invest specifically to save tax, prefer a simple tax calculation process, and do not wish to navigate complex slab rates.

When Might the Old Tax System Be Better?

The old tax system might be preferable if you avail yourself of substantial deductions and exemptions available under that regime. For instance, if you have a home loan, take significant deductions on investments, claim health insurance benefits, and have other exemptions, you should compare your tax liability under both systems.

Don’t Decide Based Solely on Salary

Looking only at your salary is insufficient when choosing a tax system. You must also understand your taxable income, applicable deductions, and whether you have income sources other than your salary.

Which System Is Better?

You may be wondering which system is better for you. This depends entirely on your total income and applicable deductions. If you have questions regarding the tax systems, the best approach is to calculate the tax liability under both options. You can also verify the details on the Income Tax Department’s website.

Conclusion
Under the new tax system, a rebate under Section 87A provides tax relief on a total income of up to ₹12 lakh, offering a significant advantage to middle-income taxpayers. Additionally, for salaried employees, the ₹75,000 standard deduction means that a salary of up to ₹12.75 lakh can effectively result in zero tax liability. However, individual circumstances vary. Therefore, before choosing between the old and new tax systems, compare your income, investments, deductions, and other sources of income.