How does Section 87A rebate work for AY 2026-27?

For resident individuals under the New Regime, if taxable income does not exceed ₹12,00,000, a rebate of 100% of tax payable or ₹60,000 (whichever is lower) is provided. With the ₹75,000 standard deduction, salaried individuals earning up to ₹12,75,000 gross annual income pay zero income tax.

How does Section 87A marginal relief protect taxpayers whose income slightly exceeds ₹12 Lakhs?

If taxable income slightly exceeds ₹12,00,000 under the New Regime, statutory marginal relief ensures that the tax payable (before 4% cess) cannot exceed the amount by which taxable income exceeds ₹12,00,000. This marginal relief operates up to a taxable income of approximately ₹12,70,588.

Which regime is better: New Tax Regime or Old Tax Regime?

With the AY 2026-27 New Regime offering zero tax up to ₹12.75 Lakhs (salaried) and lower slab rates across all brackets, the New Regime is more beneficial for the vast majority of taxpayers. The Old Regime is typically advantageous only if total eligible deductions (Standard deduction + 80C + 80D + 24(b) home loan + HRA) exceed ₹4.5 to ₹5 Lakhs.

AY 2026-27 Slabs (Finance Act 2025)Verified: AY 2026-27 (Finance Act 2025)

Income Tax Calculator AY 2026-27 & AY 2025-26 (New vs Old Regime)

Compare your tax liability under current AY 2026-27 statutory slabs (₹0-4L 0%, ₹4-8L 5%, etc.) vs the Old Tax Regime. Includes ₹75,000 standard deduction, Section 87A rebate up to ₹60,000, and marginal relief.

Direct Answer:For AY 2026-27 (FY 2025-26) on a gross annual income of ₹12,00,000, the New Tax Regime (Section 115BAC) is more tax-efficient, resulting in a total annual tax liability of ₹0 compared to ₹1,01,400 in the alternative regime, saving you ₹1,01,400 annually.

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Adjust Parameters

Assessment Year (AY) / Tax Rule Version

Statutory AY 2026-27 slabs: ₹0-4L (0%), ₹4-8L (5%), ₹8-12L (10%), ₹12-16L (15%), ₹16-20L (20%), ₹20-24L (25%), >₹24L (30%) with Section 87A rebate up to ₹60,000.

Gross Annual Income (CTC / Total Salary)₹12 Lakhs

₹

₹1,00,000₹10,00,00,000

Total income before standard deduction or Chapter VI-A investments.

Salaried Individual

Qualifies for ₹75,000 Standard Deduction (New Regime)

Age Category (Applicable for Old Tax Regime Slabs)

Recommended Choice: New Tax RegimeSave ₹1,01,400/yr

The New Tax Regime saves you ₹1,01,400 annually for AY 2026-27.

New Regime (Default - AY 2026-27)RECOMMENDED

₹0

Effective Tax: 0% | Monthly: ₹0

Std Deduction:₹75,000

Taxable Income:₹11,25,000

Section 87A Rebate:-₹52,500

Annual In-Hand:₹12,00,000

Old Regime

₹1,01,400

Effective Tax: 8.45% | Monthly: ₹8,450

Deductions Claimed:₹2,75,000

Taxable Income:₹9,25,000

Annual In-Hand:₹10,98,600

Gross Salary Allocation (New Regime, AY 2026-27)

Total: ₹12,00,000

Gross Salary Allocation (New Regime, AY 2026-27) data table
Category	Amount	Percentage
Net Take-Home Pay	₹12,00,000	100.0%
Income Tax Outflow	₹0	0.0%

New Tax Regime Slabs & Calculation (AY 2026-27 / FY 2025-26)

Section 115BAC statutory slabs with Section 87A rebate and marginal relief

Income Slab	Tax Rate	Taxable in Slab	Tax Amount
Up to ₹4 Lakh	0%	₹4,00,000	₹0
₹4 Lakh to ₹8 Lakh	5%	₹4,00,000	₹20,000
₹8 Lakh to ₹12 Lakh	10%	₹3,25,000	₹32,500
₹12 Lakh to ₹16 Lakh	15%	₹0	₹0
₹16 Lakh to ₹20 Lakh	20%	₹0	₹0
₹20 Lakh to ₹24 Lakh	25%	₹0	₹0
Above ₹24 Lakh	30%	₹0	₹0
Gross Slab Tax			₹52,500
Less: Section 87A Rebate			-₹52,500
Add: Health & Education Cess (4%)			+₹0
Total New Regime Tax Payable			₹0

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How Income Tax Calculator (AY 2026-27 / FY 2025-26) is Calculated

Transparent mathematical formulas and assumptions used across our financial engines.

Mathematical Formula

Total Tax = (Slab Tax - Section 87A Rebate + Surcharge) × 1.04 (Health & Education Cess)

Variables & Legend

AY 2026-27 Slabs

₹0-4L: 0% | ₹4-8L: 5% | ₹8-12L: 10% | ₹12-16L: 15% | ₹16-20L: 20% | ₹20-24L: 25% | Above ₹24L: 30%

Standard Deduction

₹75,000 for salaried individuals under New Regime (₹50,000 under Old Regime)

Section 87A Rebate

Full rebate up to ₹60,000 for taxable income up to ₹12,00,000 (salaried zero tax up to ₹12,75,000 gross)

Marginal Relief

Where taxable income exceeds ₹12,00,000, tax payable shall not exceed the excess of income over ₹12,00,000

Health & Education Cess

Mandatory 4% cess applied to total tax liability plus surcharge

Conventions & Assumptions

AY 2026-27 (FY 2025-26) new regime slabs under Section 115BAC: ₹0-4L (Nil), ₹4-8L (5%), ₹8-12L (10%), ₹12-16L (15%), ₹16-20L (20%), ₹20-24L (25%), above ₹24L (30%).
Salaried individuals earning gross income up to ₹12,75,000 pay zero tax under the New Regime after ₹75,000 standard deduction and Section 87A rebate.
Marginal relief protects taxpayers whose income slightly exceeds ₹12,00,000 by ensuring tax payable does not exceed the excess income above ₹12 Lakhs.
New Tax Regime is the statutory default; taxpayers must affirmatively elect Old Regime if itemized deductions (80C, 80D, 24(b), HRA) produce higher savings.

Frequently Asked Questions

Under Section 115BAC for AY 2026-27: ₹0 to ₹4 Lakh: Nil (0%); ₹4L to ₹8L: 5%; ₹8L to ₹12L: 10%; ₹12L to ₹16L: 15%; ₹16L to ₹20L: 20%; ₹20L to ₹24L: 25%; and Above ₹24L: 30%. In addition, salaried employees receive a flat standard deduction of ₹75,000.

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