Slabs are marginal — the most common misunderstanding
The single biggest confusion about Indian income tax is the belief that crossing a slab taxes your whole income at the higher rate. It does not. Each rate applies only to the income sitting inside that band.
Someone with ₹13 lakh of taxable income does not pay 15% on ₹13 lakh. They pay nothing on the first ₹4 lakh, 5% on the next ₹4 lakh, 10% on the next ₹4 lakh, and 15% only on the last ₹1 lakh. That is why the table above breaks it band by band — earning one rupee more can never leave you worse off.
Income tax slabs for FY 2026-27
New regime (the default; you must file Form 10-IEA to leave it):
| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
Old regime (unchanged since FY 2020-21 for those under 60): nil to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh, 30% above.
These are the same slabs that applied in FY 2025-26. Budget 2026 left the new-regime structure introduced by the Finance Act 2025 in force, so a calculation for FY 2026-27 (assessment year 2027-28) uses the identical bands.
Both then carry 4% health and education cess on the tax, and surcharge above ₹50 lakh.
The ₹12 lakh headline, precisely
"No tax up to ₹12 lakh" is true, with two footnotes worth knowing.
It describes taxable income, after the ₹75,000 standard deduction — so a salary of roughly ₹12.75 lakh can indeed carry zero tax. And the mechanism is not a nil slab: the slabs still compute about ₹60,000 of tax, and the Section 87A rebate cancels it.
The important part is what happens at ₹12,00,001. Without protection, one extra rupee would trigger the whole ₹60,000. Marginal relief prevents that by capping the tax at the amount by which income exceeds ₹12 lakh. Earn ₹1 over, pay about ₹1. The relief tapers out around ₹12.75 lakh, after which normal slab tax resumes.
The old regime has no such relief at its ₹5 lakh threshold. One rupee over ₹5 lakh of taxable income and the full ₹12,500 slab tax comes back. It is a genuine cliff, and it catches people every year.
Choosing a regime
The new regime trades deductions for lower rates. The old keeps 80C, 80D, HRA, home-loan interest and the rest.
The rough crossover is ₹3.75–4 lakh of total deductions. Below that the new regime almost always wins; above it the old one can. The classic old-regime case is someone renting in a metro with a substantial HRA claim, a full ₹1.5 lakh of 80C and ₹2 lakh of home-loan interest — that combination alone clears the bar.
Two things people forget: the choice is annual for salaried filers (you may switch each year), and employer NPS under 80CCD(2) survives in the new regime even though the ₹50,000 80CCD(1B) deduction does not.
What this calculator does not model
Senior and super-senior citizens' higher basic exemption, capital gains (which are taxed at their own rates, not slab — see our mutual fund tax calculator), business income and presumptive taxation, clubbing provisions, and relief under Section 89 for arrears.
It gives you the number and shows the working. For a filing, that working is what you hand to a CA — not a substitute for one.