Section 115BAC slabs for FY 2025-26: revised new-regime rate bands and the Rs 75,000 standard deduction

From assessment year 2026-27, the new tax regime under Section 115BAC(1A) of the Income-tax Act, 1961 is not merely the default option — it has become the more generous one for most salaried taxpayers. For the financial year 2025-26 the basic exemption limit has been raised from Rs 3,00,000 to Rs 4,00,000, the slab bands have been widened, and a salaried person earning up to Rs 12,75,000 a year can legally pay zero income tax. This article sets out exactly how the revised Section 115BAC slabs work, with worked numbers you can check against your own Form 16.

The new regime has been the default since FY 2023-24 (AY 2024-25), which means that unless you actively opt out, your employer deducts TDS using these bands. Understanding them is therefore not optional planning — it is the baseline against which any old-regime decision must be tested. You can run both scenarios side by side using the Oquilia old vs new regime calculator before you file.

What the Section Says

Section 115BAC(1A) prescribes a concessional slab structure that applies by default to individuals, Hindu Undivided Families, associations of persons (other than co-operative societies), bodies of individuals and artificial juridical persons. For FY 2025-26 (AY 2026-27) the seven-band structure is as follows.

Two features make these bands materially better than the FY 2024-25 version. First, the nil band has been lifted from Rs 3,00,000 to Rs 4,00,000, so the first Rs 4,00,000 of income carries no tax for everyone. Second, a fresh 25% band has been inserted between Rs 20,00,000 and Rs 24,00,000, which softens the jump to the top 30% rate that now begins only above Rs 24,00,000.

Salaried employees and pensioners receive a standard deduction of Rs 75,000 under the new regime, against Rs 50,000 in the old regime. That deduction is applied to salary income before the slabs are read, so a gross salary of Rs 12,75,000 reduces to a taxable figure of Rs 12,00,000. The standard deduction is one of the very few deductions that survive inside Section 115BAC — most Chapter VI-A deductions such as 80C and 80D, and the additional NPS deduction under 80CCD(1B), are not allowed in the new regime.

The other pillar is the Section 87A rebate. Under the new regime for FY 2025-26 the rebate has been raised to Rs 60,000, and it is available where total income does not exceed Rs 12,00,000. Because the rebate equals the tax that would otherwise fall due on income up to Rs 12,00,000, the effective entry point for tax in the new regime is total income of Rs 12,00,000, or Rs 12,75,000 of gross salary once the Rs 75,000 standard deduction is netted off. A health and education cess of 4% is then charged on the tax plus any surcharge. Surcharge under the new regime is capped at 25% even for income above Rs 5,00,00,000, a lower ceiling than the old regime's 37%.

Worked Example

Consider Priya, a salaried professional in Pune with a gross salary of Rs 24,00,000 for FY 2025-26 and no other income. After the standard deduction of Rs 75,000 her taxable income is Rs 23,25,000. The table below applies the Section 115BAC(1A) bands slab by slab.

Priya's total liability is Rs 2,92,500. By contrast, had she stayed in the old regime with only the Rs 50,000 standard deduction and no Chapter VI-A claims, her taxable income would be Rs 23,50,000, and the old slabs (nil to Rs 2,50,000, 5% to Rs 5,00,000, 20% to Rs 10,00,000, 30% above) would produce tax of Rs 5,17,500 plus 4% cess, or Rs 5,38,200. The new regime saves her Rs 2,45,700 unless she can muster very large deductions. Verify your own figure with the new regime income tax calculator.

Now take Rohan, who earns a gross salary of exactly Rs 12,75,000. His standard deduction of Rs 75,000 brings taxable income to Rs 12,00,000. The slab tax is Rs 20,000 (the 5% band) plus Rs 40,000 (the 10% band), totalling Rs 60,000. Because his total income does not exceed Rs 12,00,000, the Section 87A rebate of Rs 60,000 wipes out the entire liability, and with nil tax there is no cess. Rohan pays zero. Use the income tax calculator to confirm where your own break-even sits.

Common Mistakes

The most frequent error seen in ITR scrutiny for AY 2026-27 is assuming the Rs 60,000 rebate continues just above Rs 12,00,000. It does not. A taxpayer with total income of Rs 12,10,000 crosses the threshold and the full rebate is forfeited, though a marginal relief provision under Section 87A ensures the tax payable does not exceed the income that exceeds Rs 12,00,000. Read the threshold as a cliff with a cushion, not a gentle slope, and budget for it.

A second mistake is claiming Section 80CCD(1B) — the additional Rs 50,000 NPS deduction — inside the new regime. Section 80CCD(1B) is not allowed in the new regime; it is available only under the old regime, and an over-claim will be disallowed at processing under Section 115BAC. The employer's own contribution under Section 80CCD(2) does remain available in the new regime, so do not confuse the two sub-sections.

Third, some salaried taxpayers forget that the new regime is now the default. If you want the old regime and you have business or professional income, you must file Form 10-IEA on the income tax e-filing portal within the due date; salaried taxpayers without business income simply select the old regime in the return itself. Missing this step in FY 2025-26 leaves you in the new regime by operation of law. Our old vs new comparison tool shows the cross-over income for your deduction profile.

A fourth pitfall is mis-stating the standard deduction as Rs 50,000 in the new regime. For FY 2025-26 it is Rs 75,000 for salary and pension income; using the lower figure overstates taxable income by Rs 25,000 and the tax by up to Rs 7,500 plus cess at the 30% margin.

FAQ

What is the basic exemption limit under Section 115BAC for FY 2025-26?

The nil-tax band runs up to Rs 4,00,000 of total income, raised from Rs 3,00,000 in FY 2024-25. This applies to all individuals regardless of age in the new regime, since the higher senior-citizen exemption limits apply only under the old regime.

Can a salaried person really pay zero tax up to Rs 12,75,000?

Yes. The Rs 75,000 standard deduction reduces a gross salary of Rs 12,75,000 to a taxable income of Rs 12,00,000, and the Section 87A rebate of Rs 60,000 cancels the Rs 60,000 of slab tax. The result is a nil liability, confirmed by the structure set out by the Income Tax Department at incometax.gov.in.

Is the standard deduction different in the two regimes?

It is. The standard deduction is Rs 75,000 under the new regime for FY 2025-26 and Rs 50,000 under the old regime. Only salaried employees and pensioners qualify; it cannot be set against house property or business income.

Does the new regime allow Section 80C and 80D deductions?

No. Most Chapter VI-A deductions, including 80C investments and 80D health-insurance premiums, are not available under Section 115BAC. The notable exceptions that survive are the standard deduction and the employer's NPS contribution under Section 80CCD(2).

What surcharge applies on very high incomes in the new regime?

Surcharge rises with income but is capped at 25% in the new regime even above Rs 5,00,00,000, against a 37% ceiling in the old regime. A health and education cess of 4% is then levied on tax plus surcharge.

How do I switch back to the old regime?

Salaried taxpayers without business income may choose the old regime directly in the ITR each year. Those with business or professional income must file Form 10-IEA before the return due date, and the choice for such taxpayers is generally a once-in-a-lifetime switch back unless business income ceases.

Where can I read the legal text of Section 115BAC?

The full statutory provision is published on the official India Code repository at indiacode.nic.in and on the Income Tax Department site at incometax.gov.in. Always cross-check the band figures against the current Finance Act before relying on them for filing.