Every year, taxpayers look for the slab rates that will apply to the coming income year. For FY 2027-28 and AY 2027-28, the answer depends on which year is meant, and the two are often confused. This article sets out the rates that currently apply, explains how the new vocabulary under the Income-tax Act, 2025 fits in, and describes what can and cannot be said about income tax slabs FY 2027-28 at this stage.
FY, AY and Tax Year: Getting the Terms Right
Under the Income-tax Act, 1961, income earned in a previous year (the financial year) was assessed in the following assessment year. FY 2026-27 was therefore assessed in AY 2027-28.
The Income-tax Act, 2025 applies from 1 April 2026. It replaces “financial year” and “assessment year” with a single term, “tax year”. A rough mapping:
| Income earned during | Old terminology | New terminology |
|---|---|---|
| 1 April 2026 to 31 March 2027 | FY 2026-27, assessed in AY 2027-28 | Tax year 2026-27 |
| 1 April 2027 to 31 March 2028 | FY 2027-28, assessed in AY 2028-29 | Tax year 2027-28 |
Many websites and software tools still use the old labels, which is why searches for “AY 2027-28” and “FY 2026-27” return the same slab tables.
What Is Known About FY 2027-28?
Slab rates are set by the annual Finance Act, not by the Income-tax Act itself. The Budget for FY 2027-28 will be presented in early 2027, and until the Finance Bill for that year is enacted, the rates for income tax slabs FY 2027-28 are not law.
What is on record:
- Budget 2026-27 was presented on 1 February 2026, and it proposed no change in the basic exemption limit or the tax slabs for individuals and HUFs, so the existing slab structure applies to AY 2027-28 (FY 2026-27).
- The slab structure in force today was set by Budget 2025 and has continued unchanged since. Slabs have moved in some years and stayed put in others.
- No Budget 2027 announcement exists yet. Articles describing “new slabs for FY 2027-28” should be read as expectations or commentary, not law.
For planning purposes, the rates below are the best available reference for FY 2027-28 until the Finance Bill, 2027 is passed.
New Tax Regime Slabs (Default Regime)
The new regime is the default for individuals and HUFs. The slab structure is the same for every age group, as reported by tax-reference sources: nil up to ₹4 lakh, then 5%, 10%, 15%, 20%, 25% and 30% in successive ₹4 lakh bands up to ₹24 lakh, with 30% above that.
| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Slab tax accumulates band by band:
- tax on ₹8 lakh = ₹20,000
- tax on ₹12 lakh = ₹60,000
- tax on ₹16 lakh = ₹1,20,000
- tax on ₹20 lakh = ₹2,00,000
- tax on ₹24 lakh = ₹3,00,000
Health and education cess of 4% is added on the tax (after any rebate and including any surcharge).
Old Tax Regime Slabs (Optional Regime)
The old regime retains the earlier age-based structure and allows a wide range of deductions and exemptions. Reference sources show these slabs for taxpayers below 60 years: nil up to ₹2.5 lakh, 5% up to ₹5 lakh, 20% up to ₹10 lakh and 30% above that, and the same bands with a ₹3 lakh threshold for senior citizens aged 60 to 79.
| Taxable income | Below 60 years | 60 to 79 years (senior citizen) | 80 years and above (super senior citizen) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001 to ₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001 to ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
These age categories apply to resident individuals. Non-residents get the below-60 slabs irrespective of age, a long-standing feature of the old regime. HUFs and other non-individual taxpayers are taxed using the below-60 structure.
Rebate Under Section 87A (Section 156 in the 2025 Act)
The rebate is what makes a large band of incomes tax-free despite the slabs:
- New regime. The rebate for resident individuals is up to ₹60,000 where taxable income does not exceed ₹12,00,000, so tax is nil up to that income. For a salaried person this works out to a gross salary of ₹12,75,000, after the ₹75,000 standard deduction.
- Old regime. The rebate is up to ₹12,500, available where taxable income does not exceed ₹5,00,000.
- The rebate is available only to resident individuals. HUFs, non-residents and other entities do not get it.
Marginal relief. Without a cushion, ₹1 above ₹12 lakh would suddenly cost ₹60,000 in tax. Marginal relief prevents this by capping the tax at the amount by which income exceeds ₹12 lakh. At a taxable income of ₹12,25,000, the slab tax of ₹63,750 is capped at ₹25,000, as noted by reference sources. In effect, tax is limited to the income above ₹12 lakh until the slab tax itself becomes lower than that excess, which happens at a taxable income of ₹12,75,000.
| Taxable income (new regime) | Slab tax | Tax after rebate and marginal relief (before cess) |
|---|---|---|
| ₹12,00,000 | ₹60,000 | Nil |
| ₹12,10,000 | ₹61,500 | ₹10,000 |
| ₹12,25,000 | ₹63,750 | ₹25,000 |
| ₹12,50,000 | ₹67,500 | ₹50,000 |
| ₹12,70,000 | ₹70,500 | ₹70,000 |
| ₹12,75,000 | ₹71,250 | ₹71,250 |
The rebate may also be restricted against tax on certain special-rate capital gains. Taxpayers with such gains should confirm the current position before assuming income up to ₹12 lakh is tax-free.
Standard Deduction
Salaried individuals and pensioners get a flat deduction from salary or pension income. The amounts are:
- New regime: ₹75,000
- Old regime: ₹50,000
Self-employed individuals, HUFs and other taxpayers do not get this deduction.
Surcharge and Cess
For higher incomes, a surcharge is levied on the income tax, and then 4% cess applies on tax plus surcharge. Reference sources list the surcharge on total income as: 10% above ₹50 lakh, 15% above ₹1 crore and 25% above ₹2 crore, with the old regime adding 37% above ₹5 crore while the new regime caps the surcharge at 25%.
| Total income | Surcharge (both regimes) |
|---|---|
| Up to ₹50 lakh | Nil |
| ₹50 lakh to ₹1 crore | 10% |
| ₹1 crore to ₹2 crore | 15% |
| ₹2 crore to ₹5 crore | 25% |
| Above ₹5 crore | 25% (new regime), 37% (old regime) |
Two other points matter. First, surcharge on tax relating to certain capital gains and dividend income is capped at 15%. Second, marginal relief also applies to surcharge so that a taxpayer crossing a threshold does not pay more in extra tax and surcharge than the extra income earned.
Worked Examples (New Regime)
These examples assume a resident individual with salary income only and no other income. Taxable income is after the ₹75,000 standard deduction. Cess is 4%.
| Gross salary | Taxable income | Slab tax | After rebate | Cess | Total tax |
|---|---|---|---|---|---|
| ₹10,75,000 | ₹10,00,000 | ₹40,000 | Nil | Nil | Nil |
| ₹12,75,000 | ₹12,00,000 | ₹60,000 | Nil | Nil | Nil |
| ₹15,75,000 | ₹15,00,000 | ₹1,05,000 | ₹1,05,000 | ₹4,200 | ₹1,09,200 |
| ₹20,75,000 | ₹20,00,000 | ₹2,00,000 | ₹2,00,000 | ₹8,000 | ₹2,08,000 |
| ₹30,75,000 | ₹30,00,000 | ₹4,80,000 | ₹4,80,000 | ₹19,200 | ₹4,99,200 |
Workings for the ₹30 lakh case: slab tax up to ₹24 lakh is ₹3,00,000, plus 30% of ₹6,00,000 (₹1,80,000), giving ₹4,80,000. No surcharge applies because income is below ₹50 lakh.
New Regime vs Old Regime: Two Comparisons
The right regime depends on how much deduction a taxpayer can legitimately claim. The comparisons below use salary income and assume only the standard deduction in the old regime unless stated.
Gross salary ₹12,00,000
- New regime: taxable income ₹11,25,000, tax nil under the rebate.
- Old regime with only the standard deduction: taxable income ₹11,50,000, tax ₹1,57,500, plus cess of ₹6,300, giving ₹1,63,800. This matches the figure shown by reference sources.
- To reach nil tax under the old regime, taxable income would need to fall to ₹5,00,000 or below, which means about ₹6.5 lakh of deductions and exemptions beyond the standard deduction.
Gross salary ₹20,00,000
- New regime: taxable income ₹19,25,000, tax ₹1,85,000, plus cess of ₹7,400, giving ₹1,92,400.
- Old regime with only the standard deduction: taxable income ₹19,50,000, tax ₹3,97,500, plus cess of ₹15,900, giving ₹4,13,400.
- For the old regime to match the new regime’s tax, roughly ₹7 lakh of deductions and exemptions (beyond the standard deduction) would be needed.
At lower and middle salary levels, the new regime often produces equal or lower tax unless deductions such as housing loan interest, house rent allowance, Section 80C investments, health insurance premium and similar items are substantial. These are indicative calculations and not a substitute for an individual computation.
Deductions: What Each Regime Allows
Typically available in the new regime:
- standard deduction on salary and pension (₹75,000)
- employer contribution to NPS (within the prescribed limit)
- deduction for family pension income
- a few other specific deductions, such as the Agniveer Corpus Fund
Typically available in the old regime (subject to limits and conditions):
- Section 80C investments and payments (up to ₹1.5 lakh)
- Section 80D health insurance premium
- house rent allowance and leave travel allowance exemptions
- home loan interest on a self-occupied property
- additional NPS deduction under Section 80CCD(1B)
- Section 80TTA and 80TTB interest income deductions
The Income-tax Act, 2025 has renumbered the provisions, so section numbers in this list follow the 1961 Act. Taxpayers filing for tax year 2026-27 should map them to the corresponding sections of the new Act.
Choosing a Regime
The new regime is the default. Key points about the choice:
- Salaried individuals and others without business income can choose between regimes each year when filing the return, and can also communicate a preference to the employer for TDS purposes.
- Individuals with business or professional income can opt out of the new regime and return to it only on limited terms. Once they switch back to the old regime, the right to opt out again is restricted. The relevant provision has been carried into the 2025 Act (reference sources cite it as section 202).
- HUFs make the same choice as individuals.
- The employer’s TDS regime choice is not final. A taxpayer can switch regime while filing the return, subject to the rules above.
Special-Rate Incomes Are Taxed Outside the Slabs
Some income does not go through the slab computation at all:
- short-term capital gains on listed equity, taxed at a special flat rate (20%)
- long-term capital gains on listed equity above ₹1.25 lakh per year, taxed at 12.5%
- other long-term capital gains, generally at 12.5% without indexation
- lottery, game and similar winnings, taxed at a flat 30%
These rates apply under both regimes. The 2025 Act continues the structure, but taxpayers should confirm the current rates for the tax year of the transaction.
Other Taxpayers
The slab structure above is for individuals and HUFs. Other categories are taxed differently:
- Partnership firms and LLPs: a flat 30% on total income, with a 12% surcharge above ₹1 crore and 4% cess.
- Domestic companies: 22% under the concessional regime (subject to conditions and without most deductions), with a flat 10% surcharge and cess, giving an effective rate near 25.17%. Companies outside this regime are taxed at rates that depend on turnover.
- AOPs and BOIs: generally taxed under the individual-style slabs unless members’ shares are not determinate, in which case maximum marginal rate rules can apply.
What to Watch Before FY 2027-28 Begins
- Budget 2027 (expected early 2027). The Finance Bill will set the rates for FY 2027-28. Even unchanged slabs are formally re-enacted each year.
- Rebate and standard deduction. These are as likely to change as the slabs themselves, and they have a large effect on who pays tax at all.
- TDS for April 2027. Employers deduct TDS on salary at the rates in force for the year, so the Finance Act passed before April is the reference.
- Advance tax. Taxpayers with significant non-salary income should estimate liability under the rates that are finally enacted, not under press expectations.
- Regime choice. A fresh choice is available every year for taxpayers without business income, and a review before the year starts avoids over-deduction of TDS.
Frequently Asked Questions
1. What are the income tax slabs for AY 2027-28?
AY 2027-28 corresponds to FY 2026-27 (tax year 2026-27). Under the new regime the slabs are nil up to ₹4 lakh, then 5%, 10%, 15%, 20% and 25% in ₹4 lakh bands, and 30% above ₹24 lakh.
2. Have the slabs for FY 2027-28 been announced?
No. They will be set by the Finance Act for that year after Budget 2027. Until then, the current slabs are the working reference.
3. Did Budget 2026 change the slabs?
No. Budget 2026-27 left the slabs, basic exemption limits and rebate structure unchanged for individuals and HUFs.
4. Is income up to ₹12 lakh tax-free?
Under the new regime, taxable income up to ₹12 lakh is tax-free for a resident individual because of the rebate. For a salaried person, the effective limit on gross salary is ₹12.75 lakh after the standard deduction.
5. What is the difference between AY, FY and tax year?
The previous year (FY) was assessed in the assessment year (AY) under the 1961 Act. The 2025 Act uses a single term, tax year, for the income year. FY 2026-27 is tax year 2026-27 and AY 2027-28.
6. Which regime is the default?
The new regime is the default. Taxpayers who want the old regime must opt for it, subject to the rules for those with business income.
7. What is the standard deduction in each regime?
₹75,000 in the new regime and ₹50,000 in the old regime, for salaried individuals and pensioners.
8. How much is the surcharge?
It is 10% above ₹50 lakh of income, 15% above ₹1 crore and 25% above ₹2 crore. Above ₹5 crore it stays at 25% in the new regime and rises to 37% in the old regime.
9. Does the rebate apply to HUFs and non-residents?
No. It is available only to resident individuals.
10. Do the slabs apply to capital gains?
Specific capital gains, such as short-term gains on listed equity, are taxed at special rates and not through the regular slabs.
Disclaimer: This article is for general information based on the law and published reference material as available at the time of writing. FY 2027-28 rates depend on the Finance Act to be enacted after Budget 2027. Figures in the examples are illustrative and exclude other income, deductions and special-rate items. Please consult a qualified professional before making regime or planning decisions.