Tax Slab Overview
The Budget 2026-27 retained the existing income tax slabs for both the old and new tax regimes. Under the new tax regime, income up to ₹4 lakh remains
exempt. Income between ₹4 lakh and ₹8 lakh is taxed at 5%, while income between ₹8 lakh and ₹12 lakh is taxed at 10%. Earnings from ₹12 lakh to ₹16 lakh are taxed at 15%, which rises to 20% for income between ₹16 lakh and ₹20 lakh, and 25% for income between ₹20 lakh and ₹24 lakh. Any income exceeding ₹24 lakh is taxed at the highest slab rate of 30%.
Section 87A Rebate
A significant point to note is the Section 87A rebate. Currently, income up to ₹12 lakh to ₹12.75 lakh for salaried individuals is effectively tax-free after accounting for this rebate. This benefit is crucial for many taxpayers who continue to choose the old tax regime, hoping for lower tax rates and a higher basic exemption limit within that system.
Standard Deduction Details
Salaried taxpayers are familiar with the standard deduction, a simple way to reduce taxable income without needing to provide extensive paperwork. The standard deduction limit varies between the old and new income tax regimes. Those who opt for the old tax regime can claim a ₹50,000 standard deduction, while those under the new tax regime enjoy a higher deduction of ₹75,000.
Home Loan Interest
Taxpayers under the old tax regime can claim deductions on the interest paid on their home loans. For self-occupied residential properties, interest payments up to ₹2 lakh per year, or the actual interest paid if it's less, can be deducted from taxable income. Tax experts had suggested that extending this benefit to the new tax regime could provide a boost to the housing sector, but no such changes were announced in the budget.
Section 80C's Role
Section 80C remains a widely-used deduction under the old tax regime, but its ₹1.5 lakh limit hasn't been revised for several years. This deduction covers investments in instruments like provident funds, public provident funds (PPF), mutual funds, and other common savings options. Its continued relevance highlights the government's focus on encouraging long-term savings among taxpayers.
