New Tax Regime FY 2026-27: Complete Slab, Rebate & Marginal Relief Reference

Every year, lakhs of salaried taxpayers ask the same question: how much tax do I actually pay under the new regime? The answer for FY 2026-27 is refreshingly stable- Union Budget 2026 left the new-regime slabs, the Rs 12 lakh rebate ceiling, and the Rs 75,000 standard deduction unchanged. What confuses people is not the rates themselves, but how the three moving parts - slabs, the Section 87A rebate, and marginal relief - fit together.

This reference brings all three together in one place, with worked calculations you can verify line by line. (A terminology note: under the Income-tax Act, 2025, which replaces the 1961 Act from 1 April 2026, Section 87A is renumbered as Section 156. This article uses the familiar "87A" name.)

1. New Regime Slab Rates for FY 2026-27

The new regime (Section 115BAC, the default regime since FY 2023-24) taxes total income at the following slab rates:

Two things worth noting. First, the nil band extends to Rs 4 lakh - double the old regime's Rs 2.5 lakh basic exemption. Second, these are marginal rates: each rate applies only to the slice of income inside its band, not to your entire income.

Slab tax on exactly Rs 12,00,000 works out as follows:

• Rs 4-8 lakh at 5% = Rs 20,000
• Rs 8-12 lakh at 10% = Rs 40,000
• Total = Rs 60,000

Keep that Rs 60,000 figure in mind  - it is the exact amount the 87A rebate is designed to cancel.

2. The Rs 75,000 Standard Deduction: Why Salaried Taxpayers Get a Buffer

Salaried individuals and pensioners get a standard deduction of Rs 75,000 under the new regime before total income is computed. This single deduction is what creates the famous "Rs 12.75 lakh zero-tax salary":

The Rs 12.75 lakh figure applies only to salary or pension income. A freelancer or investor with Rs 12.75 lakh of total income gets no standard deduction under the new regime, so their total income stays at Rs 12.75 lakh - above the rebate ceiling, and fully taxable at slab rates (subject to marginal relief, covered below).

3. Section 87A Rebate: Rs 60,000 That Makes Rs 12 Lakh Tax-Free

Section 87A gives a rebate - a direct reduction of your computed tax, not a deduction from income. Under the new regime for FY 2026-27:

• Rebate amount: up to Rs 60,000
• Eligibility ceiling: total income up to Rs 12,00,000
• Who can claim: resident individuals (including senior citizens). Not available to non-residents, HUFs, firms, or companies.

The Rs 60,000 cap is precisely calibrated: it equals the slab tax on exactly Rs 12 lakh, so anyone at or below the ceiling pays zero. The rebate applies only against tax computed at slab rates - it is not available against income taxed at special rates (such as certain capital gains).

Worked example - Rs 10 lakh salary:

Because the rebate covers the entire tax up to the ceiling, there is no cess either - 4% of zero is zero.

4. Marginal Relief: The Anti-Cliff Mechanism Just Above Rs 12 Lakh

Without a safeguard, the rebate would create a cliff: earn Rs 12,00,000 and pay nothing; earn Rs 12,00,001 and suddenly owe ~Rs 60,000. Marginal relief removes the cliff. The rule is simple:

If your total income marginally exceeds Rs 12 lakh, the tax payable (before cess) cannot exceed the amount by which your income exceeds Rs 12 lakh.

In other words, tax is capped at (Total income − Rs 12,00,000) wherever that cap is lower than the normal slab tax.

Worked example - Rs 12.5 lakh total income:

Note that cess is computed after relief, on the capped tax.

How far does the relief zone extend? Relief binds only while the normal slab tax exceeds the excess income. Solving 60,000 + 0.15 × E = E gives E ≈ Rs 70,588 - so marginal relief applies for total income between Rs 12,00,000 and roughly Rs 12,70,588 . Beyond that, normal slab rates take over and the rebate is simply gone. There is no phase-out; it is a hard cap that stops mattering once the slabs catch up.

5. Surcharge and Cess

On top of slab tax (after relief, where applicable):

• Surcharge: 10% of tax for income above Rs 50 lakh up to Rs 1 crore, 15% above Rs 1 crore up to Rs 2 crore, and 25% above Rs 2 crore . The 25% cap is a deliberate new-regime concession - the old regime's surcharge goes up to 37%.
• Health & education cess: a flat 4% on (income-tax + surcharge).

For the vast majority of salaried taxpayers below Rs 50 lakh, neither surcharge nor the rebate ceiling interacts - the math is slabs, minus Rs 75,000, minus the 87A rebate, plus 4% cess.

6. What You Can Still Claim: Only Two Deductions

The new regime's bargain - lower rates in exchange for fewer deductions - is real. For FY 2026-27, essentially two deductions survive:

1. Standard deduction of Rs 75,000 for salary/pension income.
2. Employer's NPS contribution under Section 80CCD(2), up to 14% of salary (basic + DA). The employee's own NPS contribution under 80CCD(1) is not deductible in the new regime.

Everything else - 80C, 80D, HRA, LTA, home-loan interest - stays outside. That is why the regime suits taxpayers who don't have large deduction stacks, and why the old-vs-new comparison still matters for some.

7. Old vs New: A One-Line Decision Rule

Compute tax both ways; the lower number wins. As a rule of thumb for FY 2026-27, a salaried taxpayer needs roughly Rs 4-8.5 lakh of total deductions (80C + 80D + HRA + home-loan interest combined, depending on salary level) for the old regime to beat the new one. Below that, the new regime's lower slabs and the Rs 12 lakh rebate almost always win. Anyone with minimal deductions can stop comparing - the new regime is the answer.

7. Old vs New: A One-Line Decision Rule

Compute tax both ways; the lower number wins. As a rule of thumb for FY 2026-27, a salaried taxpayer needs roughly Rs 4-8.5 lakh of total deductions (80C + 80D + HRA + home-loan interest combined, depending on salary level) for the old regime to beat the new one. Below that, the new regime's lower slabs and the Rs 12 lakh rebate almost always win.

Mini-comparison - Rs 15 lakh salary, Rs 4 lakh of old-regime deductions:

The new regime wins by about Rs 35,000 here. Anyone with minimal deductions can stop comparing - the new regime is the answer.

8. A Brief History: How We Got to Rs 12 Lakh

The numbers above are not ancient. Until FY 2024-25, the new regime's 87A ceiling was just Rs 7 lakh with a Rs 25,000 rebate. Budget 2025 redrew the slabs and raised the ceiling to Rs 12 lakh with a Rs 60,000 rebate, the single biggest middle-class tax cut in recent memory. Budget 2026 left the entire structure untouched, which is why FY 2026-27 planning can rely on the same figures. If you are reading older articles quoting Rs 7 lakh or a Rs 50,000 standard deduction, they are describing a regime that no longer exists.

9. Frequently Asked Questions

Does the Rs 12 lakh rebate apply to capital gains?

No. The 87A rebate applies only against tax computed at slab rates. Income taxed at special rates - such as certain long-term capital gains is computed separately and the rebate cannot touch it.

I am an NRI. Can I claim the rebate?

No. The rebate is available only to resident individuals. (A "Resident but Not Ordinarily Resident" individual, being resident, remains eligible.)

Do I need to claim marginal relief separately?

No. It is built into the tax computation itself: wherever the capped figure is lower than the slab tax, the cap applies automatically. There is no form, no checkbox, no extra filing.

My salary is exactly Rs 12,75,000. Do I really pay zero?

Yes, Rs 75,000 standard deduction brings total income to exactly Rs 12,00,000, and the Rs 60,000 rebate wipes out the Rs 60,000 slab tax. Cess on zero is zero.

What about the old regime's 87A rebate?

Unchanged: Rs 12,500 for total income up to Rs 5 lakh. No marginal relief exists in the old regime - cross Rs 5,00,000 by a rupee and the full slab tax applies.

10. Key Takeaways

• Slabs: nil to Rs 4L; 5%-30% across seven bands; unchanged by Budget 2026.
• Zero-tax salary: Rs 12.75 lakh (Rs 12L + Rs 75,000 standard deduction).
• 87A rebate: Rs 60,000 wipes out all slab tax up to Rs 12L total income; resident individuals only.
• Marginal relief: just above Rs 12L, tax is capped at the excess over Rs 12L; relief zone runs to ~Rs 12.71L.
• Above that: normal slabs + 4% cess; surcharge capped at 25% beyond Rs 2 crore.
• Deductions: only the standard deduction and employer NPS survive.