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Section 115BAC New Tax Regime 2026: Slabs, Deductions, Exemptions & Benefits
Section 115BAC of the Income Tax Act, 1961 governs the provisions related to the new tax regime for individuals. While the new regime offers relaxed slab rates, limited deductions are available under the new regime. Up to ₹12 lakh of income can be tax-free under the new regime due to higher rebates. Assessees who have a simple income structure with little to no eligible tax saving deductions can find the new regime more beneficial.
Key Highlights of the New Tax Regime
- New Tax Regime offers a basic exemption of Rs. 4 lakh and a tax rebate of up to Rs. 60,000.
- Taxpayers enjoy tax-free income up to Rs. 12 lakh and salaried individuals enjoy tax-free income up to Rs. 12.75 lakhs.
- Deductions & Exemptions such as HRA, 80C, 80D and many more are not allowed.
- HUFs are also eligible for the New Tax Regime.
What is Section 115BAC?
Section 115BAC offers a simpler tax structure with highly relaxed slab rates and a limited deductions. This allows the taxpayers to pay lesser taxes with less investments, documentation and other compliance requirements. It offers more beneficial surcharge rates, rebate and standard deduction, allowing the taxpayers to derive tax advantage without making any elaborate tax planning, investment in tax saving deductions, and cumbersome documentation.
Who can opt for Section 115BAC?
Both individuals and HUF can opt for the new tax regime under section 115BAC. Residents, non residents including the senior citizens are eligible for the beneficial slab rates under the new regime. As already mentioned, the new regime is the default tax regime, and the choice to exercise the old regime should be made within the due date for filing the original ITR. If the due date is passed, the taxpayer cannot file under the old regime, though it is beneficial for him.
New Tax Regime Calculator
Use ClearTax Income Tax Calculator and assess your tax liability and tax savings under the New Tax Regime for FY 2025-26 & FY 2026-2027.
Income Tax Slab Rates Under Section 115BAC
Under Section 115BAC, the new tax regime tax slabs for FY 2025-26 (AY 2026-27) are as follows:
| New Tax Slabs FY 2025-26 (AY 2026-27) | New Tax Rates FY 2025-26 (AY 2026-27) |
| Up to Rs. 4 lakh | Nil |
| Rs. 4 lakh to Rs. 8 lakh | 5% |
| Rs. 8 lakh to Rs. 12 lakh | 10% |
| Rs. 12 lakh to Rs. 16 lakh | 15% |
| Rs. 16 lakh to Rs. 20 lakh | 20% |
| Rs. 20 lakh to Rs. 24 lakh | 25% |
| Above Rs. 24 lakh | 30% |
The new tax regime offers a standard deduction of Rs. 75,000 to salaried individuals.
Rebate Under New Tax Regime
Resident taxpayers can pay zero tax if their taxable income is below certain income limits. A taxpayer opting for the new tax regime, is eligible for a tax rebate of up to Rs. 60,000. Therefore, under the new tax regime, taxable income of up to Rs. 12 lakh is tax-free with zero tax liability.
However, for salaried individuals the new tax regime offers tax-free income up to Rs. 12.75. This is due to the standard deduction available.
Old and New Tax Regime for FY 2025-26 - Comparison of Deductions
The below table outlines the deductions & exemption that are allowed and disallowed under the old and new tax regimes:
| Deduction/Exemption | Old Regime | New Regime |
| Section 80C (Investment in PPF, NSC, Life Insurance Premium, ELSS, etc.) | Available up to Rs. 1.5 lakh | Not available |
| Deduction for employer’s contribution to NPS account [Section 80CCD(2)] | Available | Available (up to 14% of salary) |
| Deduction for additional employee cost (Section 80JJA) | Available | Available |
| Deduction against amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2) | Available | Available |
| Section 80D (Health insurance premium) | Available | Not available |
| Section 80E (Interest on education loan) | Available | Not available |
| Section 80G (Donations to charitable institutions) | Available | Not available |
| Section 80TTA/80TTB (Interest on savings bank account/interest for senior citizens) | Available | Not available |
| Standard Deduction (for salaried individuals) | Rs. 50,000 | Rs. 75,000 |
| House Rent Allowance (HRA) | Available (based on actuals) | Not available |
| Leave Travel Allowance (LTA) | Available | Not available |
| Professional Tax (for salaried individuals) | Available | Not available |
| Entertainment Allowance | Available | Not available |
| Transport allowance (for specially abled) | Available | Available |
| Children’s Education Allowance | Available | Not available |
| Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA) | Available | Available |
| Certain allowances such as transport allowance for specially-abled employees, conveyance allowance for job-related travel, travel compensation for tours or transfers, and daily allowances for duty-related expenses away from the workplace | Available | Available (under specific conditions) |
| Perquisites for official purposes | Available | Available |
| Employee’s (own) contribution to NPS | Available | Not available |
| Food allowance of Rs 50/meal subject to 2 meals a day | Available | Not available* |
| Allowances to MPs/MLAs | Available | Not available |
| Helper allowance | Available | Not available |
| Other special allowances [Section 10(14)] | Available | Not available |
| Self-Occupied House Property | Interest on housing loan up to ₹2 lakh deductible; loss can be set off. | No deduction for interest; no set-off of loss. |
| Let-Out House Property | Interest fully deductible; excess loss can be set off/carry forward. | Deduction limited to taxable rent; no set-off or carry forward of excess loss |
| Income from House Property Loss Set-off | Allowed (set off with other income) | Not available |
| Gifts up to Rs 50,000 | Available | Available |
| Deduction of Rs 25,000 against Family Pension | Available | Available |
| Minor child income allowance | Available | Not available |
| Donation to Political party/trust, etc | Available | Not available |
| Additional Depreciation (Section 32(1)(iia)) | Available | Not available |
| Deductions under section 32AD, 33AB, 33ABA | Available | Not available |
| Various deductions for donation for or expenditure on scientific research contained in section 35(2AA) or 35(1)(ii) or (iia) or (iii) | Available | Not available |
| Deduction under section 35AD or section 35CCC | Available | Not available |
| Exemption under section 10AA for SEZ units | Available | Not available |
| Business Loss / Unabsorbed Depreciation | Set-off and carry forward allowed if conditions are met | Not allowed if linked to deductions not available under the new regime.(e.g., Sec. 35) |
| Example: Sec. 35 Deduction Loss | Can be carried forward and set off in future years | Cannot be set off if deduction not allowed under new regime |
- Meal coupon allowance is allowed under section 202 of the Income Tax Act 2025, but not under the 1961 act.
Can I Switch Out of New Tax Regime?
The new tax regime is the default tax regime for FY 2025-26. However, taxpayers can opt out and still file taxes under the old tax regime if it is beneficial by filing Form 10-IEA.
| Particulars | Salaried Taxpayer | Non-Salaried Taxpayer |
| Opting out of New Tax Regime | Allowed | Allowed |
| Action required | Choose Old regime while filing ITR | File Form 10-IEA |
| Form 10-IEA applicability | Not applicable | Mandatory |
| Form 10-IEA filing frequency | Not required | Once (valid for future years) |
| Switching back to New regime | Allowed anytime | Allowed only once in lifetime |
Income Tax Calculation Under New Tax Regime
Mr. Rakesh has a salary income of Rs. 25 lakhs for FY 2025-26 (AY 2026-27)
The taxable income of Mr. Rakesh for FY 2025-26 under the new tax regime will be calculated as follows:
| Particulars | Amount |
| Income from Salary | 25,00,000 |
| (-) Standard Deduction | -75,000 |
| Taxable Income | 24,25,000 |
The tax liability of Mr. Rakesh will be as follows:
| Tax Regime | Tax Liability |
| New Tax Regime | 3,19,800 |
| Old Tax Regime | 5,69,400 |
By opting for the New Tax Regime, Mr. Rakesh will be able to save Rs. 2,49,600 in taxes.
New Tax Regime - Income Tax Act 2025 Changes
Though the Income Tax 2025 takes effect from 01st April 2026, the provisions of the 1961 act applies for AY 2026-27, as it pertains to income earned up to 31st march,2026.
Below is the comparison of Income Tax Act 1961 with those in the Income Tax Act 2025.
| Topics | Income Tax Act 1961 | Income Tax Act 2025 |
| New Tax regime | 115 BAC | Section 202 |
| Rebate under new regime | 87A | Section 156 |
| Exemption-VRS | 10 (10C) | Schedule |
| Leave Encashment | 10(10AA) | Schedule |
| SEZ exemption | 10AA | Schedule |
| Business Loss rule | various | Section 116 |
| Additional Depreciation | 32(1)(iia) | Section 32 |
Final Word
The new tax regime offers limited deductions and relaxed slab rates, while the old regime offers a variety of deductions with tighter slab rates. The taxpayer should determine the most beneficial regime for them considering his income level, amount of deductions and other factors to optimize the taxes.
Also Read:
1. Income Tax Slab For Women FY 2025-26
2. How To Save Taxes Under The New Regime FY 2025-26?
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