Complete Guide on Slabs, Rebate, Standard Deduction, Surcharge & Cess
The Government has continued with the New Tax Regime as the default regime and rationalised income tax slabs to provide relief to middle-income taxpayers. For Financial Year 2025-26 (Assessment Year 2026-27), the tax structure clearly focuses on higher exemption limits, enhanced rebate, and standard deduction for salaried taxpayers.
This article explains the latest income tax slab rates, along with rebate under section 87A, standard deduction, health and education cess, surcharge, and who these provisions apply to.
1. New Income Tax Slab Rates – FY 2025-26 (AY 2026-27)
Under the New Tax Regime, income tax slabs are as follows:
| Total Income | Income Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
👉 Important: Tax is calculated slab-wise, not on total income at a single rate.
2. Income Up to ₹4,00,000 Fully Exempt
For FY 2025-26, basic exemption limit under the new regime is ₹4,00,000.
This means no tax is payable if your total taxable income does not exceed ₹4 lakh.
3. Rebate Under Section 87A (Major Relief)
Who is eligible?
- Resident Individual taxpayers only
- Applicable only under the New Tax Regime
Rebate Details:
- If taxable income does not exceed ₹12,00,000,
👉 100% tax rebate available - Maximum rebate amount: ₹60,000
- Effectively, income up to ₹12 lakh becomes tax-free
Important Practical Point:
- The rebate is calculated after computing tax as per slabs
- If tax payable is ₹60,000 or less, the rebate wipes it out fully
4. Standard Deduction – ₹75,000
Who can claim?
- Salaried individuals
- Pensioners
Amount:
- ₹75,000 standard deduction allowed under the New Tax Regime
Impact:
Because of this deduction:
- A salaried person with gross income up to ₹12,75,000
(₹12,75,000 – ₹75,000 = ₹12,00,000 taxable income)
👉 Pays ZERO income tax
This makes the new regime highly attractive for salaried taxpayers who do not claim large deductions.
5. Health and Education Cess
- 4% Health and Education Cess
- Charged on:Income Tax + Surcharge (if applicable)
Cess applies to all taxpayers without exception.
6. Surcharge on High Income
Surcharge applies when total income exceeds ₹50 lakh.
| Total Income | Surcharge Rate |
|---|---|
| ₹50 lakh – ₹1 crore | 10% |
| ₹1 crore – ₹2 crore | 15% |
| ₹2 crore – ₹5 crore | 25% |
| Above ₹5 crore | 37% |
Marginal Relief:
Marginal relief ensures that extra tax due to surcharge does not exceed the income exceeding the surcharge threshold.
7. Who Should Use These Slabs?
Applicable to:
- Resident Individuals
- Salaried employees
- Pensioners
- Professionals and business persons opting for New Tax Regime
Not Applicable / Caution Needed:
- Non-resident individuals (rebate not available)
- Taxpayers with significant income taxed at special rates (e.g., certain capital gains, lottery winnings)
- Taxpayers claiming large deductions under old regime (80C, HRA, home loan interest, etc.)
8. New Regime vs Old Regime – Practical Insight
The New Tax Regime is beneficial if:
- You have limited deductions
- You are a salaried person with standard salary structure
- Your income is up to ₹12–13 lakh
The Old Tax Regime may still be better if:
- You claim large deductions (80C, 80D, HRA, home loan interest)
- You have high tax-saving investments
👉 Always compare both regimes before filing ITR
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