Income Tax India 2026

Income Tax India 2026 Complete Guide

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Income Tax India 2026- Complete Guide to Tax Slabs, New vs Old Regime, Deductions & ITR Filing under Income Tax India 2026

Priya earns Rs 12 lakh per year. She has never done tax planning in her life. Her tax this year: zero. Rahul earns Rs 15 lakh. He has a home loan, NPS contribution, and LIC premium. His tax after deductions: also near zero. Two different incomes. Two different strategies. Same result — because both understand how India’s tax system works.

From April 1, 2026, that system changed more than it has in 65 years. The Income Tax Act 1961 has been replaced by the new Income Tax Act 2025 (Act 30 of 2025). Tax rates are unchanged. But the rules, forms, deadlines, and terminology have all shifted. This guide covers everything you need to know — tax slabs, regime comparison, deductions, ITR forms, and the key changes from Finance Bill 2026.

Rs 12.75L Zero tax limit for salaried — new regime536 Sections New IT Act 2025 — down from 819April 1, 2026 IT Act 2025 effective — everything changes today7.28 Crore ITR filers AY 2024-25

What Changed with IT Act 2025

The Income Tax Act 1961 served India for 65 years. From April 1, 2026, it is replaced by the Income Tax Act 2025 (Act 30 of 2025). Tax rates are identical — this is a structural reform, not a rate change.

WhatBefore April 1, 2026From April 1, 2026
ActIncome Tax Act, 1961Income Tax Act, 2025
Sections819 sections536 sections
Rules / Forms511 rules + 399 forms333 rules + 190 forms
Time periodFinancial Year + Assessment Year“Tax Year” — one unified term
Tax ratesSameUnchanged — revenue neutral

“Tax Year” is the biggest terminology change. Tax Year 2026-27 = April 1, 2026 to March 31, 2027. Your Form 16, mutual fund statements, and bank interest certificates will now show “Tax Year 2026-27” — replacing the old “FY 2025-26 / AY 2026-27” notation.

New vs Old Regime — Which is Right for You

New Tax Regime Vs Old Tax Regime
New Tax Regime Vs Old Tax Regime 2026: Which is Better

The new tax regime is the default in 2026. You are automatically in it unless you actively opt out. The new regime has lower rates but almost no deductions. The old regime allows all deductions but at higher base rates.

One important thing to note is that Section 156 rebate does NOT apply to LTCG (Section 112A) or STCG (Section 111A) on Equity Shares or Equity Oriented Mutual Funds. If you have salary income plus mutual fund/stock gains, the 156 rebate is available only from the salary tax — not the capital gains tax.

So, if your salary is Rs. 1020000/- and there is no other income, there will be full tax rebate u/s 156 and tax payable will be nil. But, at the same time if your salary is Rs. 1000000/- and STCG on Equity Shares is Rs. 20000/-, your tax will be 20% of Rs. 20000/- + 4% education cess, as rebate u/s 156 will not be allowed from tax on STCG u/s 111A.

Tax Slabs 2026 — Complete Rate Tables

New Tax Regime — FY 2026-27 (Tax Year 2026-27)
Income SlabRateCumulative Tax
Up to Rs 4,00,000NilZero
Rs 4,00,001 — Rs 8,00,0005%Rs 20,000
Rs 8,00,001 — Rs 12,00,00010%Rs 60,000
Rs 12,00,001 — Rs 16,00,00015%Rs 1,20,000
Rs 16,00,001 — Rs 20,00,00020%Rs 2,00,000
Rs 20,00,001 — Rs 24,00,00025%Rs 3,00,000
Above Rs 24,00,00030%Rs 3,00,000 + 30% above Rs 24L

Section 156 rebate: Rs 60,000 if total income up to Rs 12,00,000 (new regime).

Old Tax Regime — FY 2026-27 (Below 60 Years)

Income SlabRate
Up to Rs 2,50,000Nil
Rs 2,50,001 — Rs 5,00,0005%
Rs 5,00,001 — Rs 10,00,00020%
Above Rs 10,00,00030%

For Senior Citizen (60-79 yrs), basic exemption limit is Rs 3,00,000 and for Super Senior citizen (80 yrs or more), this basic limit is Rs 5,00,000 and thereafter tax will be calculated as per above table.

Deductions — What is Allowed in Each Regime

DeductionOld RegimeNew Regime
Standard Deduction (salaried)Rs 50,000Rs 75,000
Section 123 — ELSS, PPF, LIC, EPF etc.Up to Rs 1,50,000Not allowed
Section 126 — Medical InsuranceRs 25,000 / Rs 50,000 seniorNot allowed
HRA Exemption Sch. III(11)Minimum of 3 conditionsNot allowed
Home Loan Interest Section 22(2)Up to Rs 2,00,000Not allowed
NPS Employee Section 124Extra Rs 50,000Not allowed
NPS Employer Section 124AllowedAllowed
LTCG Exemption Section 112ARs 1,25,000/yearRs 1,25,000/year

The only meaningful deduction in the new regime is employer NPS contribution under 124. If your employer contributes to NPS on your behalf, that is deductible even in the new regime

Finance Bill 2026 — 5 Changes That Affect You

Finance Bill 2026 (Bill No. 3 of 2026), introduced February 1, 2026. Most provisions effective April 1, 2026.

ChangeClauseWhat It Means for You
ITR Due Date ExtendedClause 5ITR-3 and ITR-4 (non-audit business/professional) due August 31 — extended from July 31. Salaried ITR-1 and ITR-2 still July 31.
New Section 234-I: Revised Return FeeClause 12Revised ITR after 9 months: Rs 5,000 fee (income above Rs 5L) or Rs 1,000 (below Rs 5L). Within 9 months: free. Effective March 1, 2026.
Section 147A: Faceless ClarificationClause 8Reassessment notices only from regular AO — not from National Faceless Assessment Centre. Retrospective from April 1, 2021.
TDS Default DecriminalisedClause 20TDS default below Rs 10L: only fine, no imprisonment. Rs 10L-50L: simple imprisonment up to 6 months or fine. Above Rs 50L: up to 2 years or fine.
Foreign Assets Disclosure SchemeClauses 114-128One-time voluntary disclosure for undisclosed foreign assets. Tax + 100% penalty = prosecution immunity. Date to be notified.

Which ITR Form Should You File?

FormWho FilesKey ConditionDue Date
ITR-1 (SAHAJ)Salaried individualsIncome up to Rs 50L. No capital gains.July 31
ITR-2Individuals with capital gainsAny LTCG or STCG from MF or stocks — even one unit means ITR-2.July 31
ITR-3Business or professional incomeNon-presumptive business income. Includes all ITR-2 sources.Aug 31 / Oct 31 (if audited)
ITR-4 (SUGAM)Presumptive income44AD business or 44ADA professional income. Income up to Rs 50L.August 31

If you have redeemed even one unit of a mutual fund in Tax Year 2026-27, you cannot file ITR-1. You must file ITR-2. This is the most common filing mistake made by salaried investors.

Income Tax India 2026 Complete Guide

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FAQs

Q1: Is Rs 12.75 lakh tax-free in 2026 for salaried employees?

Yes — in the new regime. Income up to Rs 12,00,000 attracts zero tax via Section 156 rebate of Rs 60,000. Salaried employees additionally get Rs 75,000 standard deduction — making effective zero-tax limit Rs 12,75,000. Important: 156 does not apply to STCG/LTCG from equity MF or stocks.

Q2: Which tax regime is better in 2026?

If your total deductions (123 + 126 + HRA + home loan + NPS) exceed approximately Rs 3.75 lakh at Rs 10L income or Rs 4.25 lakh at Rs 15L income — old regime saves more tax. Below those thresholds, new regime is better. Use our Income Tax Calculator 2026 to check your exact situation.

Q3: What is the ITR filing last date in 2026?

Salaried (ITR-1, ITR-2): July 31, 2026. Non-audit business and professional (ITR-3, ITR-4): August 31, 2026 — newly extended by Finance Bill 2026 Clause 5. Tax audit cases: October 31, 2026.

Q4: What is Section 156 rebate and does it apply to LTCG?

Section 156 rebate is Rs 60,000 in new regime (income up to Rs 12L) and Rs 12,500 in old regime (income up to Rs 5L). It reduces your tax to zero within those limits. It does NOT apply to LTCG under Section 112A or STCG under Section 111A.

Q5: What is “Tax Year” in the new Income Tax Act 2025?

“Tax Year” replaces “Financial Year” and “Assessment Year” under the new IT Act 2025. Tax Year 2026-27 = April 1, 2026 to March 31, 2027. Your Form 16 and investment statements will now show Tax Year 2026-27 instead of the old two-year notation. This is a terminology change only — no impact on tax calculation.

Q6: Can I switch between new and old regime every year?

Salaried employees (no business income) can switch every year. Declare your choice to your employer at year start for TDS, then formally opt when filing ITR. If you have business income, you can switch only once from new to old regime — then you are locked in as you can come in new, but now can’t go back to old. New regime is always the default.

Q7: Is 123 deduction available in the new tax regime?

No. Section 123 (ELSS, PPF, LIC, EPF, NSC, tuition fees, home loan principal) is NOT available in the new regime. Only the standard deduction of Rs 75,000 and employer NPS (Sec. 124) are allowed. To claim 123, you must opt for the old regime.

Q8: Which ITR form if I have mutual fund capital gains?

Any capital gains from mutual fund redemption — even one unit of LTCG or STCG — means you cannot file ITR-1. You must file ITR-2. This is one of the most common filing errors for salaried investors who also invest in mutual

Disclaimer : This article is for educational and informational purposes only. It is not personal tax advice. Every taxpayer’s situation is unique — income sources, deductions, residential status, and applicable sections all vary. All data is sourced from official government sources as cited. Also, there may be some changes while passing of Finance Bill, 2026. For your specific tax calculation and ITR filing, please consult a qualified Chartered Accountant or use the official e-filing portal https://www.incometax.gov.in/iec/foportal/

Author –

CA Ajay Khandelwal is a Chartered Accountant and financial expert with over 21 years of experience in taxation, compliance, and business advisory. As a key expert at AspirixWriters, he provides practical insights on income tax, financial planning, and regulatory matters, helping readers make informed financial decisions.

Author Profile CA. Ajay Khandelwal

References

Finance Bill 2026, Bill No. 3 of 2026, as introduced in Lok Sabha February 1, 2026 | Clause 2 (rates), Clause 5 (due dates), Clause 8 (147A), Clause 12 (234-I), Clause 20 (276B), Clauses 114-128 (Foreign Assets Scheme) | indiabudget.gov.in — https://indiabudget.gov.in

Income Tax Act 2025 (Act 30 of 2025), notified in Official Gazette August 21, 2025 | Replaces IT Act 1961 from April 1, 2026 | 536 sections, 333 rules, 190 forms | egazette.gov.in — https://egazette.gov.in

Finance Act 2025 | Section 202 — new tax regime | Standard deduction Rs 75,000 | 124 employer NPS in new regime | incometaxindia.gov.in — https://incometaxindia.gov.in

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