In India, the income tax slab rates depend on the tax regime you choose and your age. The new tax regime is the default option, but taxpayers can still opt for the old tax regime if it proves more beneficial.

This blog explains the latest income tax law and practice, including rebates under Section 87A, examples of tax calculation, and the difference between the two regimes for FY 2025-26 (AY 2026-27).

New Tax Regime (Default)

The new income tax regime comes with a simplified structure offering lower rates but fewer deductions and exemptions.

• Up to ₹4,00,000: Nil

   

• ₹4,00,001 to ₹8,00,000: 5%

   

• ₹8,00,001 to ₹12,00,000: 10%

   

• ₹12,00,001 to ₹16,00,000: 15%

   

• ₹16,00,001 to ₹20,00,000: 20%

   

• ₹20,00,001 to ₹24,00,000: 25%

   

• Above ₹24,00,000: 30%

   

This regime is particularly useful for individuals who do not claim multiple deductions under the Income Tax Act, 1961.

Old Tax Regime

The old income tax regime continues to allow deductions like Section 80C, HRA, and medical insurance. Slabs vary depending on the age of the taxpayer.

• Individuals below 60 years: Up to ₹2.5 lakh tax-free.

   

• Senior Citizens (60-80 years): Up to ₹3 lakh tax-free.

   

• Super Senior Citizens (80+ years): Up to ₹5 lakh tax-free.

   

This regime benefits salaried employees who maximize deductions under Chapter VI-A.

Rebate Under Section 87A

The rebate under Section 87A is a direct reduction in tax liability.

• Under the new tax regime, resident individuals with income up to ₹12 lakh get a rebate up to ₹60,000.

   

• Under the old tax regime, the rebate is available only if income does not exceed ₹5 lakh.

   

This makes Section 87A one of the most important provisions for middle-income earners.

Examples of Tax Calculation

Case 1: ₹10 Lakh under New Tax Regime

Tax before rebate = ₹40,000.
Rebate under Section 87A = ₹40,000 (since income < ₹12 lakh).
Final tax payable = Zero.

Case 2: ₹13 Lakh under New Tax Regime

Tax before rebate = ₹75,000.
Rebate not available (income > ₹12 lakh).
Final tax payable = ₹78,000 (after cess).

Case 3: ₹4.5 Lakh under Old Tax Regime

Tax before rebate = ₹10,000.
Rebate under Section 87A = ₹10,000.
Final tax payable = Zero.

Case 4: ₹6 Lakh under Old Tax Regime

Tax before rebate = ₹32,500.
Rebate not available (income > ₹5 lakh).
Final tax payable = ₹33,800.

Related Important Sections in Income Tax Act

When understanding Indian taxation, a few additional sections are often researched by students, professionals, and taxpayers:

• Section 143(1) income tax intimation and the difference between 143(1) and 143(1A).

   

• Section 144 of Income Tax Act – best judgment assessment.

   

• Section 148 of Income Tax Act – income escaping assessment.

   

• Section 80IAC of Income Tax Act – tax exemption for startups recognized by DPIIT.

   

• Previous year meaning in income tax – relevant for computation of taxable income.

   

If you’re preparing for law exams, resources like law of taxation notes PDF and taxation law LLB notes PDF download can also help in understanding these provisions.

Why This Matters

For individuals and businesses alike, knowledge of slab rates, rebates, and exemptions is critical. Whether you are a salaried employee, a small business owner filing with a business profession code, or a startup exploring tax exemption for startups under Section 80IAC, understanding the scope of income tax ensures compliance and savings.