The New Tax Regime for FY 2026-27 (AY 2027-28) makes income effectively tax-free up to ₹12.75 Lakh for salaried individuals. This is achieved through an increased standard deduction of ₹75,000 and a tax rebate of up to ₹60,000 under Section 87A for taxable income up to ₹12 Lakh.
What You Will Learn
- Updated tax slabs for New vs. Old Regime for FY 2026-27.
- How the ₹75,000 standard deduction works for salaried taxpayers.
- Marginal relief rules for income slightly above ₹12 Lakh.
- ITR form selection guide (ITR-1 to ITR-4) for 2026.
New Tax Regime Slabs for FY 2026-27 (AY 2027-28)
As of April 1, 2026, the tax slabs introduced in the previous budget have been carried forward into the new financial year. The New Tax Regime remains the default choice for all individual taxpayers unless they specifically opt for the Old Regime. The hallmark of the 2026-27 tax structure is its simplicity and significantly higher exemption limits for middle-income earners.
For salaried employees and pensioners, the **standard deduction** has been maintained at ₹75,000. When combined with the Section 87A rebate, this means anyone with a gross salary of up to ₹12.75 Lakh per year (considering inflation trends) can effectively bring their tax liability down to zero.
Old vs. New Tax Regime: Which One Should You Choose?
The choice between regimes depends entirely on your investments. If you have significant deductions under Section 80C (LIC, PF, ELSS), Section 80D (Health Insurance), and home loan interest (Section 24b), the Old Regime might still be beneficial. However, for most taxpayers, the New Regime is the mathematical winner in 2026-27.
- New Regime: Best if your gross income is below ₹15 Lakh and you don't have major investments. Zero tax up to ₹12.75 Lakh gross salary.
- Old Regime: Best only if your total deductions (80C, 80D, HRA, etc.) exceed ₹4.25 Lakh.
- Marginal Relief: If your taxable income is slightly above ₹12 Lakh (e.g., ₹12,05,000), you are eligible for marginal relief to ensure the tax paid isn't more than the income earned over ₹12 Lakh.
ITR Forms for AY 2027-28: Picking the Right One
The Income Tax Department has notified new versions of ITR forms in April 2026. One major change in **ITR-1 (Sahaj)** is the ability to report income from up to two house properties (previously limited to one). Here is how to pick your form:
ITR-1 (Sahaj)
For residents with total income up to ₹50 Lakh from Salary, 2 House Properties, and Other Sources.
ITR-2
For individuals/HUFs with capital gains or foreign income, but no business profits.
ITR-3
Mandatory for individuals having income from business or profession.
ITR-4 (Sugam)
For presumptive business income (u/s 44AD/44ADA) with income up to ₹50 Lakh.
Tax-Saving for 2026: Why NPS and Health Insurance Still Matter
Even under the New Tax Regime, certain contributions like the National Pension System (NPS) under Section 80CCD(2) remain highly beneficial. Employers can contribute up to 14% of the basic salary to NPS, which is a tax-free perk for the employee. Additionally, while the ₹75,000 standard deduction covers a major chunk, staying updated with new government updates will help you maximize your take-home pay in FY 2026-27.
Key Takeaways
- Standard deduction for salaried employees is ₹75,000 under New Tax Regime, a key strategy for saving money in 2026.
- Section 87A rebate makes taxable income up to ₹12 Lakh effectively tax-free, as highlighted in our freelancer tax guide.
- ITR-1 (Sahaj) can now handle 2 house properties for AY 2027-28, simplifying the process discussed in our AI tools for ITR article.
- New Regime is the default; opt-out is required if you want to choose the Old Regime.
Frequently Asked Questions
Last Updated: May 03, 2026 | Source: Income Tax Department (Official Website)