How we calculate
These are the rules Pannu Lekka uses for Tax Year 2026-27 (1 April 2026 to 31 March 2027) under the Income-tax Act, 2025. They are for a resident individual with salary, pension, family pension, interest and other ordinary income. Every rule links to its source.
The tax year and the Act
The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961. It speaks of a "tax year": the twelve months starting 1 April. There is no "assessment year" in the new Act, so we never use that word. Income from 1 April 2026 to 31 March 2027 is Tax Year 2026-27.
Income earned in 2025-26 is still taxed and filed under the 1961 Act, as assessment year 2026-27. It is a separate return, and this app does not calculate it.
The Union Budget of 1 February 2026 changed no personal-tax rates, slabs, rebate or standard deduction for this year. The Income-tax Rules, 2026 were notified on 20 March 2026 and apply from 1 April 2026.
Sources
- Income-tax Act, 2025 as amended by the Finance Act, 2026 (PDF)Government page
- PIB press release, 1 April 2026Government page
- Section 3: tax yearGovernment page
- Income-tax Rules, 2026 gazette (PDF)Government page
- Memorandum to the Finance Bill, 2026 (PDF)Government page
- CBDT FAQs on the transition to the new Act (PDF)Government page
New regime (section 202)
The new regime is the default under section 202 (old section 115BAC). Its slabs are the same at every age: there are no senior slabs here.
| Total income | Rate | Tax at the top of the band |
|---|---|---|
| Up to ₹4,00,000 | Nil | ₹0 |
| over ₹4,00,000up to ₹8,00,000 | 5% | ₹20,000 |
| over ₹8,00,000up to ₹12,00,000 | 10% | ₹60,000 |
| over ₹12,00,000up to ₹16,00,000 | 15% | ₹1,20,000 |
| over ₹16,00,000up to ₹20,00,000 | 20% | ₹2,00,000 |
| over ₹20,00,000up to ₹24,00,000 | 25% | ₹3,00,000 |
| Above ₹24,00,000 | 30% | – |
What the new regime allows
- Standard deduction of ₹75,000 on salary or pension from a former employer, or the salary if that is less (section 19, old 16(ia)).
- Family pension: one third of it or ₹25,000, whichever is less, is deducted (section 93, old 57(iia)).
- Employer’s NPS contribution up to 14% of salary (basic plus DA), for every employer (section 124, old 80CCD(2)).
Not allowed in the new regime: HRA, LTA, professional tax, 80C and the other Chapter VIII deductions, self-occupied home-loan interest, and the 80TTA and 80TTB interest deductions. Let-out house loss cannot be set off against other income.
Sources
- Section 202Government page
- PIB, Budget 2025 income-tax highlightsGovernment page
- Section 19Government page
- Section 93Government page
- TaxHeal: section 93, family pensionExplainer
- Section 124Government page
- e-filing portal: new and old regime FAQsGovernment page
Rebate and marginal relief (section 156)
New regime: if total income is ₹12,00,000 or less, the rebate cancels the tax, up to ₹60,000. A salaried person with a gross salary up to ₹12,75,000 pays nothing, because the ₹75,000 standard deduction brings total income to ₹12,00,000.
Marginal relief: above ₹12,00,000, the tax before cess can never be more than the income above ₹12,00,000. Relief applies from ₹12,00,001 up to about ₹12,70,588; above that the slab tax is lower than the excess and no relief is needed.
Worked example: total income ₹12,10,000 (new regime)
| Tax on the slabs | ₹61,500 |
|---|---|
| Income above ₹12,00,000 | ₹10,000 |
| Tax after rebate (the lower of the two) | ₹10,000 |
| Cess at 4% | ₹400 |
| Tax to pay | ₹10,400 |
The rebate does not apply to tax on special-rate income such as capital gains. The app does not cover capital gains.
Old regime: if total income is ₹5,00,000 or less, the rebate cancels the tax, up to ₹12,500. There is no marginal relief in the old regime. At ₹5,00,010 of total income the full tax is due: a cliff.
Sources
- Section 156Government page
- TaxGuru: rebate and marginal relief up to ₹12 lakhExplainer
- PIB, Budget 2025 income-tax highlightsGovernment page
Old regime
You opt for the old regime under section 202(4). Its rates are in the First Schedule of the Finance Act, 2026. Slabs depend on age; a resident who is 60 or 80 at any time during the tax year gets that slab.
| Total income | Below 60 | 60 to 79 | 80 and above |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil | Nil |
| over ₹2,50,000up to ₹3,00,000 | 5% | Nil | Nil |
| over ₹3,00,000up to ₹5,00,000 | 5% | 5% | Nil |
| over ₹5,00,000up to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
| Below 60 | ₹1,12,500 |
|---|---|
| 60 to 79 | ₹1,10,000 |
| 80 and above | ₹1,00,000 |
Salary deductions in the old regime: standard deduction ₹50,000 (or the salary, if less) and professional tax actually paid (section 19). Family pension: one third or ₹15,000, whichever is less.
Pension from a former employer is taxed as salary, so it gets the standard deduction. Family pension is taxed as "other sources". Seniors get the interest deduction below and the higher health-insurance limits, in the old regime only.
Sources
- Memorandum to the Finance Bill, 2026 (PDF)Government page
- Finance Act, 2026 (PDF)Government page
- TaxGuru: Finance Act 2026 rate tablesExplainer
- Section 202Government page
- Section 19Government page
- Section 93Government page
- TaxHeal: section 93, family pensionExplainer
Old-regime claims and their limits
Each of these is allowed only in the old regime. The app shows the limit next to the box where you type the claim.
| Claim | Limit |
|---|---|
| Section 123 (old 80C): PF, PPF, ELSS, life insurance, tuition fees, home-loan principal and more | ₹1,50,000 in all |
| Section 124 (old 80CCD(1B)): your own extra NPS contribution | ₹50,000, over the ₹1,50,000 |
| Section 124 (old 80CCD(2)): employer’s NPS contribution | 14% of salary for a government employer, 10% for others (new regime: 14% for all) |
| Section 126 (old 80D): health insurance for you, your spouse and children | ₹25,000, or ₹50,000 if a senior is covered |
| Section 126 (old 80D): health insurance for parents | A further ₹25,000, or ₹50,000 if a parent is a senior. Total at most ₹1,00,000. A preventive check-up of ₹5,000 is inside these limits. |
| Section 153 (old 80TTA): savings-account interest, below 60 | ₹10,000 |
| Section 153 (old 80TTB): savings and deposit interest, 60 and above | ₹50,000. A senior cannot claim both. |
| Section 22 (old 24(b)): interest on a self-occupied home loan | ₹2,00,000 for a loan to buy or build, completed within 5 years; otherwise ₹30,000 |
| Section 129 (old 80E): education-loan interest | The whole interest, for up to 8 years |
| HRA exemption (Schedule III and Rule 279; old 10(13A)) | The least of three amounts. See the next section. |
| LTA exemption (Schedule III and Rule 278; old 10(5)) | Travel cost within India, limited to the economy air fare or AC first-class rail fare. You type the exempt amount; the app does not work it out. |
| Professional tax (section 19; old 16(iii)) | The amount actually paid. State law limits it to ₹2,500 a year. |
| Other deductions (80G, 80U, 80DD and similar) | One number you type. The app labels it "not checked by us". |
Sources
- TaxGuru: Chapter VIII deductionsExplainer
- Section 124Government page
- Section 126Government page
- Section 22Government page
- CalcGuru: 80TTA and 80TTBExplainer
- GST Gyaan: section 129 and section 154Explainer
- Rule 278: LTAGovernment page
HRA
In the old regime, the exempt HRA is the least of these three amounts:
- The HRA you actually received.
- Rent paid, minus 10% of salary.
- 50% of salary if the house is in one of the 8 cities below, otherwise 40%.
"Salary" here means basic pay plus DA (if DA counts for retirement benefits), for the months you lived in the rented house. There is no exemption if you pay no rent or live in your own house.
The 8 cities at 50% from Tax Year 2026-27 (Rule 279):
Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad
In 2025-26 only Delhi, Mumbai, Kolkata and Chennai were at 50%.
Sources
- Rule 279: HRAGovernment page
- Income-tax Rules, 2026 gazette (PDF)Government page
- BDO: Rules 2026, HRA and allowancesExplainer
Surcharge, cess and rounding
Surcharge is added to the income tax after the rebate. Marginal relief on surcharge, and cess, come next.
| Total income | Old regime | New regime |
|---|---|---|
| Up to ₹50 lakh | Nil | Nil |
| ₹50 lakh to ₹1 crore | 10% | 10% |
| ₹1 crore to ₹2 crore | 15% | 15% |
| ₹2 crore to ₹5 crore | 25% | 25% |
| Above ₹5 crore | 37% | 25% |
Marginal relief on surcharge: at each threshold (₹50 lakh, ₹1 crore, ₹2 crore, and ₹5 crore in the old regime), tax plus surcharge cannot be more than the tax plus surcharge at exactly the threshold, plus the income above it.
Health and education cess is 4% of the income tax plus surcharge. There is no marginal relief on cess.
Rounding (section 516): paise are ignored, then total income and the final tax are rounded to the nearest ₹10 (₹5 or more goes up). We round total income first, calculate, and round the tax after cess last, never in between.
Sources
- Income Tax Department: surchargeGovernment page
- Income Tax Department: tax ratesGovernment page
- Memorandum to the Finance Bill, 2026 (PDF)Government page
- Section 516Government page
Choosing a regime, and TDS
The new regime applies unless you opt out. If you are salaried or a pensioner with no business income, you choose every year in the return you file, and you can switch each year. There is no form to send in advance.
Your employer asks which regime you want so that it deducts the right TDS each month. If you say nothing, it deducts under the new regime. What you tell your employer is not the legal choice; the return is.
Employers deduct TDS on salary monthly at the average rate on your estimated yearly income (section 392, old 192). Pannu Lekka shows "about X a month" as yearly tax divided by 12. Your employer may differ if you get a bonus, join mid-year or declared other income.
The return for Tax Year 2026-27 is due by 31 July 2027 for salary, pension and interest income (ITR-1 or ITR-2).
Sources
- e-filing portal: new and old regime FAQsGovernment page
- Section 392Government page
- TaxGuru: return due datesExplainer
- CalcGuru: old vs new regimeExplainer
- e-filing portalGovernment page
What changed this year
- A new Act. Section numbers changed: the 80C deduction is now section 123, the 87A rebate is section 156, the 115BAC regime is section 202, and the 80D, 80E and 80TTA/80TTB deductions are sections 126, 129 and 153. The app shows both numbers.
- HRA at 50% now covers 8 cities (Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad) instead of 4.
- Slabs, the rebate, the standard deduction, surcharge and cess are the same as in 2025-26.
- Allowance limits were raised by the Income-tax Rules, 2026: children education allowance to ₹3,000 a month per child, hostel allowance to ₹9,000, meal vouchers to ₹200 a meal, and employer gifts to ₹15,000 a year. Pannu Lekka does not work these out. Enter the taxable salary from your Form 16.
Sources
- CBDT FAQs on the transition to the new Act (PDF)Government page
- BDO: Rules 2026, HRA and allowancesExplainer
- Income-tax Rules, 2026 gazette (PDF)Government page
What is not included
Capital gains of any kind, business or professional income, agricultural income, non-residents and HUF, advance-tax dates, filing a return, PAN, and any year other than Tax Year 2026-27. The result says so: "Have capital gains or business income? This result does not include them."
Found something that looks wrong?
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