How Much Tax Will You Pay in FY 2026–27? New Tax Slabs, Surcharge & Calculations Explained

Synopsis: This article explains in detail the new income tax regime and old income tax regime, changes in these regimes with Budget 2026, deductions, surcharges, cess, rebates and everything you need to know about how much tax you will pay in FY 2026-27.

With Budget 2026 bringing no changes to income tax slabs, many taxpayers are unsure about how the tax rules apply and which regime to choose. For FY2026-27, individuals can continue to choose between the old and the new tax regime. Both offer varied benefits.  

New Income Tax Regime for FY 2026-27

Old Income Tax Regime for FY 2026-27 

Old Income Tax Regime for FY 2026-27 For Senior Citizens

Old Income Tax Regime for FY 2026-27 For Super Senior Citizens

Standard Deduction

Standard deduction is a fixed amount deducted from the salary or pension income of salaried individuals or pensioners before calculating taxable income. For FY2026-27, the standard deduction offered under the new tax regime stays at ₹75,000, and under the old tax regime is ₹50,000, implying there is no change in the standard deduction offered. 

For example, if your salary is ₹12,75,000, with standard deduction, your taxable income will come down to ₹12,00,000, which will make you eligible to claim rebate under Section 87A.

Other Deductions and Exemptions

Under the old tax regime, taxpayers can opt for deductions and exemptions which they’ll have to give up if they choose the new tax regime. Under Section 80C, taxpayers can claim up to ₹1.5 lakh per year through contributions to EPF, PPF, ELSS, life insurance premiums, repayment of home loans, and children’s tuition fees. Additionally, more deductions and exemptions can be claimed under Section 80CCD, Section 80G and Section 80TTB, etc.

Rebate

Under Section 87A of the Income Tax Act, a rebate of up to ₹60,000 is provided for individuals resident in India and with a taxable income below the threshold of ₹12 lakh. This rebate is available only under the new income tax regime and is not applicable to special rate incomes such as capital gains. 

For example, if the gross salary is ₹12,75,000, with standard deduction, the taxable income can be brought down to ₹12,00,000. As the taxable amount is under the threshold to claim rebate, ₹60,000 can be claimed as a rebate. That is, no tax has to be paid before cess and surcharges. 

Cess

A Health and Education Cess of 4% is levied on the income tax with surcharge. This cess rate is the same under both the income tax regimes and is used to fund health and education initiatives by the government. 

Surcharge Rates

A surcharge is levied on the amount of tax payable and not on the gross income, once the total income of a taxpayer exceeds ₹50 lakh in a financial year.  

New Income Tax Regime

Old Income Tax Regime

Also read: Old vs New Tax Regime for FY 2026-27: Which Income Tax Slab Works Better for You?

What Changed In Budget 2026 and What Didn’t?

The Union Budget 2026 has kept personal income tax slabs and thresholds unchanged for FY 2026-27 and Assessment Year 2027-28. The government’s focus is on simplifying tax filings and reducing compliance issues, rather than changes in tax slabs. 

The Budget has also introduced the Income Tax Act 2025 to replace the decade-old Income Tax Act, 1961, which will be effective from April 1, 2026. The government says the new Act is in simpler language, more streamlined, and less complex.

However, there have been several changes in the draft rules and allowances, such as an increase in the exemption limits of HRA, children’s hostel and education allowances, an interest-free concessional loan, as well as a transport allowance. If finalised, these changes could meaningfully reduce the tax liability of taxpayers and align taxation with the rising living costs.

How Much Tax Will You Pay in FY2026-27?

For a non-senior citizen individual with a gross salary of ₹15 LPA, the tax payable varies drastically depending on the income tax regime chosen.

Which Tax Regime Should You Choose?

New Tax Regime: If you are a young salaried professional with limited deductions to claim under 80C, HRA, etc., then choose the new tax regime. Another plus of this regime is minimal paperwork required and low tax rates. 

If your annual income is up to 12 lakh, choose the new tax regime to not pay any tax. You can choose this regime if your annual income is around 15-25 lakhs, but you have modest deductions to reduce the tax amount payable.

Old Tax Regime: If you have high deductions and exemptions to claim under Section 80C, HRA, home loan interest, etc., then this regime would be ideal. However, it requires quite some paperwork and planning to execute. This is also a good choice for senior and super senior citizens as it’s more tax-efficient for them than the new regime.

Conclusion

There are not many changes in the income tax framework for FY 2026-27. Through Budget 2026, the government offers stability instead of surprises. Therefore, the smartest approach would be to calculate tax liability under both regimes and choose the one that maximises your take-home pay.

Written by Nila Maria Jacob