In the Union Budget 2026-27 presented by Finance Minister Nirmala Sitharaman on February 1, 2026, the income tax slabs for FY 2026-27 (AY 2027-28) remained unchanged in both the old and new systems—disappointing many salaried taxpayers hoping for relief amid rising inflation.

Under the new (default) system, the slabs are as follows: Nil up to ₹4 lakh; 5% on ₹4-8 lakh; 10% on ₹8-12 lakh; 15% on ₹12-16 lakh; 20% on ₹16-20 lakh; 25% on ₹20-24 lakh; and 30% above ₹24 lakh. A key benefit is the Section 87A exemption (up to ₹60,000), which makes taxable income up to ₹12 lakh tax-free. Salaried individuals benefit from a standard deduction of ₹75,000, taking the effective zero-tax limit up to ₹12.75 lakh gross salary.

The age-based exemptions in the old system remain intact: nil up to ₹2.5 lakh (below 60 years), ₹3 lakh (senior citizens 60-80), and ₹5 lakh (super seniors 80+). Subsequent slabs: 5% up to ₹5 lakh (adjusted as per age), 20% up to ₹10 lakh, and 30% above that. It allows more deductions/exemptions (eg, 80C, home loan interest), but does not have the higher exemption limits of the new system.

With no slab revisions after 2025’s significant changes, the focus was on the upcoming Income Tax Act, 2025 (effective from April 1, 2026), which promises simplified compliance, redesigned forms and ease for common taxpayers.

Taxpayers should evaluate the system carefully: Choose the new one if there are minimal deductions; If claiming substantial discount then choose old. Use online calculators or consult professionals to optimize based on income, investments and goals. This continuity allows for predictability, but it reflects the government’s focus on structural reforms rather than immediate slab changes.