Section 115BAC New Tax Regime 2026: Slabs, Benefits, Exemptions & Deductions

 You've probably already heard that Section 115BAC introduced India's new tax regime, but choosing between the new and old regimes can still be confusing. The challenge is knowing which slabs, deductions, rebates and filing rules actually apply to your assessment year. In this guide, we'll explain Section 115BAC in simple terms, including the current tax slabs, eligible deductions, regime-selection rules, practical calculations, NRI implications and the transition to the Income-tax Act, 2025.

Key Takeaways

• Section 115BAC provides the statutory framework for the new tax regime for eligible taxpayers under the Income-tax Act, 1961.

• The new tax regime is the default regime for relevant taxpayers, but eligible taxpayers can opt for the old regime subject to applicable rules.

• AY 2026–27 has seven new-regime slabs, beginning with a nil rate up to ₹4 lakh and reaching 30% above ₹24 lakh.

• The ₹60,000 Section 87A rebate is available to eligible resident individuals with taxable income up to ₹12 lakh under the new regime.

• The new regime does not eliminate every deduction; specified benefits such as Section 80CCD(2), Section 80CCH and certain house-property deductions remain available subject to conditions.

• NRIs can use the new-regime slabs, but the Section 87A rebate is a resident-individual benefit and NRI-specific income rules must also be considered.

• Section 202 of the Income-tax Act, 2025 corresponds to the new-regime provision for tax years beginning on or after 1 April 2026, while Section 115BAC remains relevant for AY 2026–27. 

What Is Section 115BAC of the Income Tax Act?

Section 115BAC of the Income-tax Act, 1961 provides the statutory framework for the new tax regime applicable to eligible taxpayers. The provision offers revised income-tax slab rates while restricting several deductions and exemptions that are generally available under the old tax regime.

First, the new regime was introduced to provide a simpler tax structure with lower slab rates and fewer tax-saving conditions. For example, instead of relying heavily on deductions such as Section 80C, a taxpayer can calculate tax using the revised slabs with fewer deductions.

Moreover, Section 115BAC became the default tax regime from AY 2024–25 for individuals, HUFs, certain AOPs, BOIs and artificial juridical persons, while eligible taxpayers can still opt out and choose the old regime. — Source: Income Tax Department, 2026.

At the same time, Section 115BAC should not be interpreted as meaning that all tax deductions disappear. Specified deductions and exemptions continue to be available where the law permits them.

For example, an employee may still claim the ₹75,000 standard deduction against salary income under the new regime, while an employer's eligible NPS contribution can qualify for deduction under Section 80CCD(2).

Why Section 115BAC Matters for Taxpayers

Section 115BAC matters because the tax regime you select can materially change your final tax liability. The lower new-regime slab rates do not automatically mean that the new regime will be better for every taxpayer.

First, taxpayers should compare their actual deductions, exemptions, income sources and tax liability under both regimes. For example, a salaried taxpayer with substantial eligible deductions under the old regime may reach a different result from a taxpayer who has relatively few deductions.

Moreover, the new regime is designed to reduce dependence on tax-saving investments and documentation. A taxpayer with salary income, standard deduction and employer NPS contribution may find the new regime straightforward.

In contrast, a taxpayer using substantial 80C, 80D, HRA, education-loan interest or self-occupied home-loan benefits should calculate both options before deciding.

What Are the Tax Slabs Under Section 115BAC for AY 2026–27?

The Section 115BAC new-regime tax slabs for AY 2026–27 range from a nil rate up to ₹4 lakh to a 30% rate on income above ₹24 lakh. — Source: Income Tax Department, 2026. 

First, these rates apply progressively, meaning each slab is taxed at its applicable rate rather than the entire income being taxed at the highest rate. For example, taxable income of ₹16 lakh does not attract 15% on the entire ₹16 lakh.

Next, eligible resident individuals can also receive a Section 87A rebate of up to ₹60,000 when taxable income does not exceed ₹12 lakh under the new regime. — Source: Income Tax Department, 2026.

At the same time, the rebate is not available to NRIs because Section 87A is a resident-individual benefit. Therefore, an NRI should not assume that taxable income of ₹12 lakh automatically results in zero tax.

For salaried taxpayers, the ₹75,000 standard deduction can reduce taxable salary income. Therefore, a salary of ₹12.75 lakh may result in taxable income of ₹12 lakh before considering other applicable adjustments. — Source: Income Tax Department, 2026.

What About Cess and Surcharge Under 115BAC?

Health and Education Cess is charged at 4% of income tax plus applicable surcharge under both regimes. — Source: Income Tax Department, 2026.

Furthermore, surcharge under the new regime is 10% for income above ₹50 lakh up to ₹1 crore, 15% above ₹1 crore up to ₹2 crore, and 25% above ₹2 crore. The maximum surcharge under the new regime is generally 25%, unlike the 37% maximum applicable under the old regime. — Source: Income Tax Department, 2026.

Which Deductions Are Allowed Under Section 115BAC?

Deductions under Section 115BAC are limited but several specified deductions and benefits remain available under the new regime. The exact benefit depends on the taxpayer's income type and statutory conditions.

First, salaried individuals can claim the ₹75,000 standard deduction. For example, an employee earning ₹20 lakh of salary can generally reduce salary income by ₹75,000 before calculating taxable income under the new regime.

Second, employer contributions to the National Pension System can qualify under Section 80CCD(2). For eligible contributions, the deduction limit is up to 14% of salary under the current rules. — Source: Income Tax Department, 2026.

Third, Section 80CCH provides a deduction for qualifying contributions to the Agniveer Corpus Fund. The deduction is subject to the conditions prescribed under the provision.

In addition, certain business-related deductions can remain available under specified conditions. These include provisions such as Section 80JJA and Section 80JJAA, depending on the nature of the taxpayer's business and eligibility.

Is Home-Loan Interest Allowed Under the New Regime?

Home-loan interest under Section 24(b) can be available under the new regime for certain let-out house properties, but the treatment differs significantly from the old regime. The Income Tax Department states that interest may be allowed without a monetary ceiling for a let-out property, while the resulting house-property loss cannot be set off against other heads or carried forward under the new regime.

For example, if a taxpayer owns a rented property and incurs ₹3 lakh of eligible interest, the interest deduction can be considered against the property's taxable income subject to the applicable provisions, but an excess resulting loss cannot be used in the same way as under the old regime.

Which Salary Exemptions Can Still Apply?

Certain salary-related exemptions can continue under the new regime where specifically permitted. These may include eligible retirement-related benefits such as gratuity, leave encashment and voluntary-retirement benefits, along with specified allowances for official or employment-related purposes, subject to statutory conditions.

For example, a specially-abled employee may qualify for an eligible transport allowance where the prescribed conditions are satisfied. The availability of a benefit therefore depends on the specific provision and factual circumstances, rather than simply on whether the taxpayer uses the new regime.

Which Deductions Are Not Available Under Section 115BAC?

Most popular Chapter VI-A deductions are not available under the new regime, which is the main trade-off for the revised slab rates.

First, common deductions generally unavailable include Section 80C, Section 80D, Section 80E, Section 80G, Section 80TTA and Section 80TTB, subject to specific statutory exceptions. For example, an employee cannot normally reduce new-regime taxable income by claiming the ₹1.5 lakh Section 80C limit for PPF, ELSS or life-insurance investments.

Second, common salary exemptions such as HRA and LTA are generally not available under the new regime. Professional tax and entertainment allowance deductions available under the old regime are also restricted under the new regime.

Third, interest on a home loan for a self-occupied property is not deductible under the new regime in the manner available under the old regime. This can materially affect homeowners who use Section 24(b) as a major tax-saving benefit. 

Therefore, the new regime should not be selected simply because its slab rates appear lower. A taxpayer with ₹1.5 lakh of 80C investments, ₹50,000 of 80D benefits and substantial HRA may need to compare the actual tax payable under both systems.

Who Is Eligible for Section 115BAC?

Section 115BAC is available to eligible individuals and HUFs, and the new-regime framework also covers certain AOPs, BOIs and artificial juridical persons under the applicable provisions.

First, both resident and non-resident individuals can fall under the new-regime slab structure. The Income Tax Department separately publishes the Section 115BAC rates for non-resident individuals for AY 2026–27.

Second, senior citizens do not receive separate higher exemption slabs under the new regime in the way they do under the old regime. For example, the new-regime slab structure continues to begin at ₹4 lakh for individuals irrespective of age categories.

Moreover, eligibility does not mean that every taxpayer must remain in the new regime permanently. Eligible taxpayers can opt out and use the old regime under the applicable filing rules.

Is the New Tax Regime Mandatory Under Section 115BAC?

The new tax regime is the default regime, not an irreversible mandatory regime, for eligible taxpayers. Taxpayers who satisfy the applicable conditions can opt out and choose the old tax regime.

First, taxpayers without business or professional income can generally choose the old regime directly in their ITR. The choice can be exercised for each relevant assessment year, subject to the prescribed filing deadline.

Second, taxpayers having income from business or profession face additional regime-selection requirements. Such taxpayers generally need to furnish Form 10-IEA within the applicable time when opting out of the default new regime.

Furthermore, the Income Tax Department states that business or professional taxpayers can use Form 10-IEA to opt out of the new regime or re-enter it, with the re-entry option subject to the prescribed lifetime and subsequent-assessment-year conditions.

How Does 115BAC Compare With the Old Tax Regime?

The new and old regimes differ mainly in slab rates, deductions, exemptions and tax-planning flexibility. The new regime generally offers lower and more granular slab rates, while the old regime permits a broader range of deductions.

First, the new regime is often simpler for taxpayers with fewer deductions. For example, a salaried employee with ₹15 lakh income, standard deduction and limited investments may find the new regime attractive.

Second, the old regime may become competitive where a taxpayer has substantial eligible deductions. A taxpayer with HRA, 80C, 80D, home-loan interest and other eligible deductions should compare the actual taxable income rather than comparing headline slab rates.

How Is Tax Calculated Under Section 115BAC?

Tax under Section 115BAC is calculated by determining taxable income, applying the relevant slab rates, considering eligible rebate and then adding applicable surcharge and cess.

First, consider a salaried taxpayer with ₹25 lakh salary income for FY 2025–26 and no other deductions except the standard deduction. The ₹75,000 standard deduction reduces taxable salary to ₹24.25 lakh.

Second, the slab-based tax is calculated progressively:

• ₹0–₹4 lakh: Nil

• ₹4–₹8 lakh: ₹20,000

• ₹8–₹12 lakh: ₹40,000

• ₹12–₹16 lakh: ₹60,000

• ₹16–₹20 lakh: ₹80,000

• ₹20–₹24 lakh: ₹1,00,000

• ₹24–₹24.25 lakh: ₹7,500

Therefore, the income-tax liability before cess is ₹3,07,500. After 4% Health and Education Cess of ₹12,300, the total tax is ₹3,19,800, assuming no other adjustments, surcharge or special-rate income.

For comparison, the same ₹25 lakh salary with only the old-regime ₹50,000 standard deduction would produce taxable income of ₹24.50 lakh. Applying the applicable old-regime slabs and 4% cess gives approximately ₹5,69,400, illustrating why the new regime can be significantly beneficial when deductions are limited.

How Does Section 115BAC Apply to NRIs?

Section 115BAC applies to eligible non-resident individuals, and the Income Tax Department publishes the same AY 2026–27 new-regime slab structure for NRIs. However, NRIs must separately consider residential status, Indian-source income and special tax rules applicable to particular income types.

First, an NRI does not receive the Section 87A rebate merely because taxable income is below ₹12 lakh. The Income Tax Department identifies the rebate as available to resident individuals, so NRIs should not treat the ₹12 lakh threshold as an automatic zero-tax threshold.

Second, an NRI should examine the nature of Indian income before selecting a regime. For example, rental income, Indian salary, interest income and capital gains can have different tax treatments, and some income may be subject to special rates that are not simply taxed using the ordinary slab structure.

Third, NRI taxpayers should also consider DTAA provisions and foreign-tax implications where relevant. Regime selection under 115BAC is only one part of an NRI's overall Indian tax analysis.

What Changed With the Income-tax Act, 2025?

The Income-tax Act, 2025 introduces Section 202 as the corresponding new-regime provision for tax years beginning on or after 1 April 2026. This does not mean that Section 115BAC suddenly becomes irrelevant for AY 2026–27.

First, the Income Tax Department explains that the Income-tax Act, 1961 was repealed with effect from 1 April 2026, but its provisions continue to govern tax years beginning before that date. Therefore, income earned during FY 2025–26 is reported for AY 2026–27 under the framework of the 1961 Act.

How Can You Decide Between the New and Old Regime?

The better tax regime is the one that produces the lower final tax liability after considering all eligible deductions, exemptions, rebates and special-rate income. There is no universal regime that is best for every taxpayer.

First, calculate your gross income and identify each source of income. For example, a taxpayer may have salary, rental income, bank interest and capital gains rather than salary alone.

Second, list deductions and exemptions that you can actually claim under the old regime and identify the smaller set of benefits available under the new regime. This prevents you from assuming that an investment automatically creates a tax benefit.

Third, calculate the tax payable under both regimes. A useful decision process is:

1. Calculate total income.

2. Identify applicable deductions and exemptions.

3. Calculate taxable income under both regimes.

4. Apply the relevant slab and special tax rates.

5. Apply eligible rebate and surcharge.

6. Add 4% Health and Education Cess.

7. Compare the final tax liability.

8. Select the regime using the applicable ITR and filing procedure.

Tools and Practical Application

An income-tax calculator is useful because regime selection should be based on actual numbers rather than assumptions about slab rates. A calculator can help compare taxable income and final liability under both regimes using the taxpayer's income and eligible deductions.

First, enter salary or business income and other relevant income sources. Next, enter eligible deductions and exemptions for the applicable regime, then compare the resulting tax liabilities.

Moreover, taxpayers with more complex situations should verify the calculator output against the applicable assessment-year rules. This is particularly important for NRIs, taxpayers with capital gains, taxpayers with foreign income and individuals with business or professional income.

For official verification, taxpayers should use the Income Tax Department's AY 2026–27 guidance and e-filing resources as the primary reference for current slabs, rebates and filing requirements.

What's Next: Steps Before Choosing Section 115BAC

The next step is to compare both regimes using your actual income and eligible deductions before filing your return. A quick comparison can prevent you from choosing a regime based only on the headline 30% versus old-regime rates.

First, confirm the assessment year and applicable law. For AY 2026–27, use the Section 115BAC framework under the Income-tax Act, 1961; for tax years beginning on or after 1 April 2026, review the corresponding provisions under the Income-tax Act, 2025.

Second, identify whether you have business or professional income because the regime-selection process can require Form 10-IEA.

Third, if you are an NRI, verify residential status, Indian-source income, applicable special rates and DTAA considerations before concluding that one regime is automatically better.

Finally, calculate the actual final tax payable under both regimes, select the appropriate option and complete the ITR within the applicable deadline.

Conclusion

Section 115BAC of the Income-tax Act, 1961 provides the framework for India's new tax regime, combining revised slab rates with restrictions on many deductions and exemptions. For AY 2026–27, the regime begins with a nil rate up to ₹4 lakh and reaches 30% above ₹24 lakh, while eligible resident individuals can receive a Section 87A rebate of up to ₹60,000 subject to the applicable conditions.

Moreover, the new regime is not simply a “no-deduction” regime. Benefits such as the ₹75,000 standard deduction, eligible employer NPS contributions under Section 80CCD(2), Section 80CCH and certain house-property provisions remain available under specified conditions.

Most importantly, the best regime depends on your circumstances. Compare your actual deductions, exemptions, income sources and final tax liability instead of choosing a regime solely because its slab rates appear lower.

For AY 2026–27, Section 115BAC remains the relevant new-regime provision under the Income-tax Act, 1961, while Section 202 of the Income-tax Act, 2025 provides the corresponding framework for tax years beginning on or after 1 April 2026.