Short answer: From 1 April 2026, income tax in India is governed by the Income-tax Act, 2025, which replaced the 1961 Act and uses a single ‘tax year’ instead of ‘previous year’ and ‘assessment year’. Tax rates did not change: for tax year 2026-27, the new regime (now section 202) remains the default, salaried people get a ₹75,000 standard deduction, and income up to ₹12 lakh is effectively tax-free after rebate. Returns for income earned in FY 2025-26 are still filed under the old Act.
Last updated: 13 October 2026.
What changed on 1 April 2026
The new law is mainly a rewrite for simplicity rather than a change in how much tax you pay. According to the Income Tax Department’s explainer on the new Act and the PIB note on the Income Tax Act, 2025:
- Tax year: the year from 1 April 2026 to 31 March 2027 is ‘tax year 2026-27’. The terms ‘assessment year’ and ‘previous year’ are gone for new years.
- Section numbers changed: the new regime is in section 202; the old 80C-type investment deduction is now section 123; salary TDS rules are consolidated under section 393. You will see these numbers in new forms and Form 16s.
- Transition: income earned up to 31 March 2026 (FY 2025-26) is assessed under the 1961 Act, so the return you file in 2026 uses old-Act forms and section references.
- Regime choice carries over: if you were already in the new regime, you do not need to opt in again.
Tax slabs for salaried individuals, tax year 2026-27
| New regime (default) | Rate | Old regime (if you opt out) | Rate |
|---|---|---|---|
| Up to ₹4,00,000 | Nil | Up to ₹2,50,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹2,50,001 – ₹5,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹5,00,001 – ₹10,00,000 | 20% |
| ₹12,00,001 – ₹16,00,000 | 15% | Above ₹10,00,000 | 30% |
| ₹16,00,001 – ₹20,00,000 | 20% | ||
| ₹20,00,001 – ₹24,00,000 | 25% | ||
| Above ₹24,00,000 | 30% |
Under the new regime, a rebate of up to ₹60,000 makes total income up to ₹12 lakh tax-free, and with the ₹75,000 standard deduction that means salary up to ₹12.75 lakh. The old regime keeps a ₹50,000 standard deduction and a rebate for income up to ₹5 lakh. A 4% health and education cess applies on top of tax in both, and surcharge applies at higher incomes.
Worked example: which regime costs less?
Illustrative figures, salary only, before surcharge. The old-regime column assumes the employee claims ₹1.5 lakh under the investment deduction (old 80C, now section 123), ₹2 lakh of home loan interest on a self-occupied house, and ₹25,000 of health insurance premium, plus the ₹50,000 standard deduction.
| Gross salary | New regime tax (incl. cess) | Old regime tax with ₹4.25 lakh of deductions | Old regime with only ₹1.5 lakh investment deduction |
|---|---|---|---|
| ₹10,00,000 | ₹0 | ₹28,600 | ₹75,400 |
| ₹13,00,000 | ₹26,000 (after marginal relief) | ₹91,000 | ₹1,48,200 |
| ₹18,00,000 | ₹1,50,800 | ₹2,34,000 | ₹3,04,200 |
| ₹25,00,000 | ₹3,19,800 | ₹4,52,400 | ₹5,22,600 |
For most salaried people, the new regime now costs less unless they have large HRA exemptions plus home loan interest and full investment deductions. Run your own numbers each year; salaried employees without business income can switch regimes when filing their return.
Where loans and income tax meet
- Home loans: interest on a self-occupied home (up to ₹2 lakh a year) and principal (within the investment deduction limit) are deductible only in the old regime. In the new regime, interest on a let-out property can still reduce rental income. See our home loans hub and home loan tax benefits.
- Education loans: interest on a loan for higher studies is deductible for up to eight years in the old regime (formerly section 80E, now section 129), with no upper limit. Read our education loan guide.
- Personal loans: interest is generally not deductible, unless the money is used for a home purchase or construction, or for business, and you can show it.
- Your ITR as income proof: lenders use Form 16, ITRs and the Annual Information Statement (AIS) to verify income, especially for the self-employed. See loans for the self-employed with ITR and our personal loan eligibility and documents guide.
Planning a loan around your tax and salary? Compare offers from RBI-regulated lenders.
Tax-saving guides (for old-regime filers)
If you stay in the old regime, these guides explain the main options. Some were written under the 1961 Act; the limits are largely unchanged, but section numbers differ under the 2025 Act.
- How salaried employees can save tax
- ELSS mutual funds and tax
- Saving tax with National Savings Certificates
- Tax on life insurance premiums
- Provident fund contributions and withdrawals: our EPFO hub
Filing checklist for 2026
- Collect Form 16 from your employer and download Form 26AS and the AIS from the e-filing portal.
- Match TDS, interest income and high-value transactions in AIS with your own records.
- Pick the right form: most salaried residents with income up to ₹50 lakh use ITR-1; see the department’s guidance on which return applies.
- Choose your regime in the return; employer declarations do not lock you in.
- Check your bank account is pre-validated so refunds are not delayed. If details are wrong, see updating bank details in an ITR.
Frequently asked questions
Does the Income-tax Act, 2025 change my tax rates?
No. The government has said the new Act does not change tax rates. Slabs for tax year 2026-27 are the same as for FY 2025-26; what changed is the structure, terminology and section numbers.
Which Act applies to the return I file in July 2026?
The 1961 Act. That return covers income earned from April 2025 to March 2026, which is assessed under the old law and old forms. The 2025 Act applies to income from 1 April 2026 onwards.
Is income up to ₹12 lakh really tax-free?
In the new regime, yes, for resident individuals with normal income, because the rebate offsets the tax. Special-rate income such as certain capital gains is treated differently. Salaried people also get the ₹75,000 standard deduction.
Can I claim personal loan interest as a deduction?
Generally no. It may be allowed only if you can show the money was used to buy or build a house, or for your business, and the relevant rules are met.
Can I switch between the old and new regime every year?
If you have no business or professional income, you can choose the regime each year when you file. With business income, switching is restricted.
Sources
- Income Tax Department: Objective and scope of the new Act
- PIB: Understanding the Income Tax Act, 2025
- Income Tax Department: Return applicable for salaried individuals
Disclosure: FundsTiger (Gatimaan Finance Advisors Pvt. Ltd.) is a loan marketplace and lending service provider for RBI-regulated lenders. Aparampaar Finance Pvt. Ltd. (Omozing), one of those lenders, is a related party of FundsTiger. This article is general information, not financial advice. Read your loan agreement and KFS before you decide.