Is the new tax regime the default for AY 2026-27?
The new tax regime under section 115BAC is the default from AY 2024-25. AY 2026-27 slabs, the Rs 60,000 rebate up to Rs 12 lakh, Form 10-IEA for business income, and which deductions still survive.
In this guide
The new tax regime under section 115BAC is the default from AY 2024-25 for an individual, HUF, AOP (other than a co-operative), BOI or artificial juridical person. For AY 2026-27 the nil slab is Rs 4 lakh and the section 87A rebate is Rs 60,000 up to Rs 12 lakh of taxable income. Opt out in the return by the section 139(1) due date; business income also needs Form 10-IEA.
What is the new tax regime?
The new tax regime is the set of lower slab rates in section 202 of the Income-tax Act, 2025, still computed for AY 2026-27 under section 115BAC of the 1961 Act. It trades most exemptions and Chapter VI-A deductions for those lower rates. The old regime is the pre-115BAC slab table plus the deductions that table was built around.
Finance Act 2023 made the new regime the default from AY 2024-25. Nothing in that default forces you to stay there. The choice is real; the default only decides what happens if you say nothing.
Who falls under the default?
An individual, a Hindu undivided family, an AOP that is not a co-operative society, a BOI, or an artificial juridical person is in the new regime unless that person opts out. Companies and firms are outside this default. They have their own concessional-rate sections.
An employee who does not tell the employer which regime to use is treated as remaining in the default. The employer then deducts TDS at the section 115BAC rates. That intimation is not the statutory option. The option is exercised later, in the return (and, for business income, in Form 10-IEA) on or before the section 139(1) due date.
What slabs apply right now?
For AY 2026-27 the Department's salaried-individuals page, last reviewed 9 July 2026, publishes these new-regime slabs under section 115BAC, the same table for every age:
| Taxable income | Rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 to Rs 8,00,000 | 5% |
| Rs 8,00,001 to Rs 12,00,000 | 10% |
| Rs 12,00,001 to Rs 16,00,000 | 15% |
| Rs 16,00,001 to Rs 20,00,000 | 20% |
| Rs 20,00,001 to Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
The old-regime nil band still moves with age: Rs 2,50,000 below 60, Rs 3,00,000 from 60, Rs 5,00,000 from 80. Above that the old table is 5 per cent, then 20 per cent from Rs 5 lakh, then 30 per cent from Rs 10 lakh.
How do rebate and surcharge differ?
Section 87A in the new regime gives a resident individual a rebate of up to Rs 60,000 where taxable income does not exceed Rs 12,00,000. The old-regime rebate is Rs 12,500 where taxable income does not exceed Rs 5,00,000. Health and education cess is 4 per cent of tax plus surcharge in both. New-regime surcharge tops out at 25 per cent above Rs 5 crore; old-regime surcharge on that band is 37 per cent.
Which deductions remain allowed?
Almost none of the popular Chapter VI-A heads survive in the new regime. The Department's AY 2026-27 page names what does.
| Head | New regime | Old regime |
|---|---|---|
| Section 80C / 80D / 80G | Not allowed | Allowed, 80C cap Rs 1,50,000 |
| Section 10(13A) HRA | Not allowed | Allowed |
| Section 24(b) self-occupied interest | Not allowed | Up to Rs 2,00,000 |
| Section 24(b) let-out interest | Actual, no set-off against other heads | Actual, set-off cap Rs 2,00,000 |
| Section 80CCD(2) employer NPS | 14% of salary, all employers | 14% if the employer is government, else 10% |
| Section 80CCH Agnipath | Allowed | Allowed |
How do you opt out?
A person with no business income opts out inside the ITR filed on or before the section 139(1) due date. ITR-1 and ITR-2 have a yes field for opting out. No separate form.
- Open the AY 2026-27 slabs page and run both computations.
- If you have only salary, house property and other sources, tick the opt-out in ITR-1 or ITR-2.
- If you have business or professional income, furnish Form 10-IEA on or before the same due date, then file ITR-3, ITR-4 or ITR-5.
- Tell the employer the intended regime for TDS. That intimation does not replace the return (or Form 10-IEA).
Can business income switch yearly?
No. Once a person with business or professional income opts out of the new regime, that person has one later chance to come back. After that one return to the new regime, the old regime is not available again. A person without business income can choose each year.
Form 10-IEA filed for a year cannot be withdrawn in that same year. The Department's FAQ is blunt on this: if you filed 10-IEA by mistake, you wait until the next assessment year to file it again for withdrawal. From AY 2024-25 the new regime is a fresh default, so earlier years' elections do not carry.
From tax year 2026-27 the same default is section 202 of the Income-tax Act, 2025, with the switch mechanics in section 333. Until then, confirm the live table on the Department slabs page and watch CBDT updates for any later change to the rates or the rebate.
Practical checks
Common questions
Is the new tax regime compulsory?
No. The new tax regime is the default from AY 2024-25 under section 115BAC, but an eligible person can opt out and pay tax under the old slabs and deductions. The opt-out has to be exercised on or before the section 139(1) due date.
What is the new tax regime nil slab for AY 2026-27?
Rs 4 lakh. The Income Tax Department salaried-individuals page for AY 2026-27, last reviewed 9 July 2026, puts the new-regime nil band at income up to Rs 4,00,000 for every age group. The old-regime nil band stays Rs 2,50,000 below age 60, Rs 3,00,000 from age 60, and Rs 5,00,000 from age 80.
How much is the section 87A rebate in the new regime?
Rs 60,000, and only where taxable income does not exceed Rs 12,00,000. The old-regime rebate is Rs 12,500 where taxable income does not exceed Rs 5,00,000. Both figures are on the Department's AY 2026-27 slabs page.
Can I claim 80C in the new tax regime?
No. Chapter VI-A deductions such as section 80C, 80D, 80DD and 80G are not available in the new regime. The surviving heads named on the Department's AY 2026-27 page are employer contribution under section 80CCD(2) (14 per cent of salary) and section 80CCH (Agnipath).
Do I need Form 10-IEA to choose the old regime?
Only if you have income from business or profession. A salaried person filing ITR-1 or ITR-2 ticks the opt-out inside the return. ITR-3, ITR-4 and ITR-5 filers with business income must furnish Form 10-IEA on or before the section 139(1) due date.
Can I change regime every year?
Yes if you have no business income: the choice is made each year in that year's return. No if you have business income: once you opt out of the new regime you get one later chance to switch back, and after that switch the old regime is closed.
Does HRA exemption exist in the new regime?
No. House rent allowance under section 10(13A) is an old-regime exemption. The Department's new-vs-old FAQ states it is not available in the new regime. Interest on a self-occupied house under section 24(b) is also disallowed there.
Where does this sit in the Income-tax Act, 2025?
Section 202 of the Income-tax Act, 2025 is titled new tax regime for individuals, Hindu undivided family and others. Section 333 covers switching over of regimes. Returns for AY 2026-27 still compute under section 115BAC of the 1961 Act, which is the page the Department currently publishes.
Publication method
How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 2 September 2026.
Automation, including AI, may assist research, drafting and structure. It does not replace the official record or amount to an independent professional review. Read our editorial standards and corrections policy.
Verification path
Official sources used
Keep reading
Related guides
- How-to · TaxHow does section 54 exempt house-sale capital gains?How an individual or HUF exempts the capital gain on selling a residential house by buying or building another, the one-year-before to two-year-after purchase window, the three-year construction window, the Capital Gains Account Scheme, and the two-crore lifetime option for two houses.
- How-to · TaxWhen does an e-commerce operator deduct 194-O?When an e-commerce operator deducts 0.1 per cent on the gross sales it routes to a seller, the five-lakh exemption for a resident individual or HUF with PAN on file, the 5 per cent no-PAN floor, how it differs from GST TCS, and why section 194-O now reads as section 393(1) Sl. 8(v).
- How-to · TaxWhat is the difference between Form 16 and Form 16A?What Form 16 certifies, what Form 16A certifies, who issues each one from TRACES, the 31 May annual due date for Form 16, the fifteen-day quarterly due date for Form 16A, and why a missing certificate does not block the ITR claim.