Income Tax Slab Rates as per Budget 2026 for FY 2026-27 (AY 2027-28)

Budget 2026 has not changed the income tax slab rates applicable under the normal tax regime. The slab structure for FY 2026-27 remains the same as FY 2025-26 for individuals, HUFs, companies, firms, and other assessees.

However, the new tax regime under Section 115BAC continues with the revised slab structure applicable from AY 2026-27, along with enhanced rebate under Section 87A.

1. Income Tax Rates – Individuals, HUF, AOP, BOI, AJP

(Normal / Old Tax Regime)

1.1 Individuals (Below 60 years)

✔ Same rates for AY 2026-27 and AY 2025-26

1.2 Resident Senior Citizens (60–79 years)

1.3 Resident Super Senior Citizens (80 years & above)

1.4 HUF / AOP / BOI / Artificial Juridical Person

2. Surcharge on Individuals / HUF / AOP / BOI

Important Notes:

• Enhanced surcharge not applicable on:
  • Dividend income
  • Capital gains under Sections 111A, 112, 112A, 115AD
• Maximum surcharge capped at 15% on such incomes
• Marginal relief available at each surcharge threshold

3. Health & Education Cess

• 4% on income tax + surcharge
• Not applicable to specified funds under Section 10(4D) in notified cases

4. Rebate under Section 87A (Old Regime)

• Resident individuals with total income up to ₹5,00,000
• Maximum rebate: ₹12,500
• Tax liability becomes Nil

5. Alternate Minimum Tax (AMT) – Individuals & Non-Corporate Assessees

• Applicable if normal tax < 18.5% of adjusted total income
• 9% AMT for IFSC units earning income in convertible foreign exchange

6. New Tax Regime – Section 115BAC for Individuals, HUF, AOP, BOI, AJP

(Default regime from AY 2024-25 onwards)

6.1 Slab Rates for AY 2026-27

6.2 Section 87A Rebate – New Regime

• Up to ₹12,00,000 income
• Maximum rebate: ₹60,000
• Marginal relief available if income slightly exceeds ₹12 lakh
• AMT not applicable under new regime

7. Partnership Firms / LLPs

• Flat tax rate: 30%
• Surcharge: 12% if income exceeds ₹1 crore
• Cess: 4%
• AMT: 18.5% (9% for IFSC units)

8. Local Authorities

• Tax rate: 30%
• Same surcharge, cess, and AMT provisions as partnership firms

9. Domestic Companies

Special Regimes:

• 115BAA – 22%
• 115BAB – 15%
• Surcharge: Flat 10%

🔴 Important Change in Minimum Alternate Tax (MAT) – Budget 2026

Applicable from FY 2026-27 (AY 2027-28)

Budget 2026 has proposed a major rationalisation of the Minimum Alternate Tax (MAT) provisions, applicable to companies, with the objective of simplifying corporate taxation and enabling a smooth shift to the new tax regime.

These changes are proposed to be effective from 1 April 2026 and will apply from FY 2026-27 onwards.

1. Existing MAT Provisions (Before Budget 2026)

• MAT is applicable to companies under the old tax regime
• Charged at 15% of book profit (plus surcharge and cess)
• Applicable when:MAT liability > Normal income-tax liability

MAT Credit (Earlier Rule)

• Excess MAT paid over regular tax was allowed as MAT credit
• MAT credit could be:
  • Carried forward for 15 years
  • Set off in future years when normal tax exceeds MAT

2. New MAT Provisions After Budget 2026

Budget 2026 proposes three key changes in MAT:

🔹 (A) Reduction in MAT Rate

• MAT rate reduced from 15% to 14% of book profit
• Applicable to:
  • All companies other than IFSC units
• Surcharge and cess will continue to apply as per law

📌 This provides direct tax relief to companies still under MAT.

🔹 (B) MAT to Become Final Tax in Old Regime

• Under the old tax regime, MAT paid will now be treated as final tax
• No new MAT credit will be allowed for MAT paid in the old regime

➡ This means:

• Once MAT is paid, no future credit accumulation
• MAT regime becomes simple and non-deferrable

🔹 (C) Restricted Set-off of MAT Credit

✅ For Domestic Companies (New Tax Regime)

• Set-off of MAT credit will be allowed only in the new tax regime
• Set-off limited to 25% of the total tax liability

✅ For Foreign Companies

• MAT credit set-off allowed only to the extent of:

Difference between:

• Tax on total income (normal provisions)
• Minimum Alternate Tax (MAT)

• Allowed only in the year when normal tax exceeds MAT

3. Transition Benefit – Shift from Old to New Tax Regime

The Government has clearly stated that these changes are intended to:

• Encourage companies to shift from old regime to new regime
• Avoid long-term accumulation of MAT credit
• Simplify corporate tax structure
• Improve predictability and compliance ease

📌 This ensures a smooth transition for companies moving away from deduction-heavy taxation.

4. Effective Date

• Applicable from: 1 April 2026
• Relevant for:
  • FY 2026-27
  • AY 2027-28 and onwards

5. Summary of MAT Changes – At a Glance

🔑 Key Takeaways for Companies

• MAT is now lower but final under the old regime
• MAT credit benefit is significantly curtailed
• New regime becomes more attractive for corporates
• Long pending MAT credit balances may lose relevance
• Companies must re-evaluate regime selection from FY 2026-27

10. Foreign Companies

• Surcharge: 2% / 5%
• Cess: 4%
• MAT applicable unless exempted

11. Co-operative Societies

Normal Rates

Alternative Regimes

• 115BAD – 22%
• 115BAE – 15% (manufacturing societies)
• AMT not applicable once opted

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