Income Tax Slabs in India for FY 2026-27, Explained

India runs two parallel income tax systems — the new (default) regime and the old regime — and which one saves you more depends entirely on how many deductions and exemptions you claim. Here's how the slabs work and how to think about the choice.

How slab-based tax works

Income tax in India is progressive and slab-based: you don't pay one flat rate on your entire income. Instead, each portion of your income that falls into a slab is taxed at that slab's rate — so moving into a higher slab only raises the rate on the income above that threshold, not your whole salary.

New regime vs old regime, at a glance

• New regime (default): lower slab rates, but most deductions and exemptions (like 80C, HRA, and most others) aren't available.
• Old regime: higher slab rates, but you can claim deductions — 80C investments, HRA, home loan interest, and more — which can bring your effective tax down significantly if you have enough eligible deductions.
• You can choose either regime each year (for salaried individuals) when filing, so it's worth comparing both.

How to figure out which is better for you

1. List out your eligible deductions under the old regime — 80C (PF, ELSS, life insurance), HRA if you pay rent, home loan interest, and any others that apply.
2. If your deductions add up to a large portion of your income, the old regime often works out cheaper despite the higher slab rates.
3. If you have few or no deductions to claim, the new regime's lower rates usually win.
4. Run both scenarios through an income tax calculator with your actual numbers — the difference isn't always obvious just from the slab rates.

Common mistakes

• Assuming the new regime is always better because the rates look lower — it depends entirely on how many deductions you'd otherwise claim.
• Forgetting that the choice of regime can usually be changed each year for salaried taxpayers, so it's worth re-checking annually rather than sticking with one forever.
• Not accounting for employer-side benefits like HRA when comparing regimes.