Income tax under the new regime, FY 2026-27:
work it out slab by slab

How income tax is calculated under the new regime

Under the new regime, tax is worked out on taxable income, not on gross pay. You start with your income, subtract only the deductions the regime allows, apply the slab rates to what remains, and then adjust for rebate, surcharge and cess.

FY 2026–27 means the financial year starting 1 April 2026, and its income is reported in the return for AY 2027–28. Keeping the two labels straight stops you picking up a chart meant for a different year.

This page explains the method and the order of steps. It deliberately does not list slab limits or rebate amounts, because the law sets them and they can change. Copy them from the official income-tax portal for the year you are working on.

Residential status and the type of income also matter. A resident individual with only salary and interest is the simplest case; capital gains, business income or foreign income each bring their own rules, which you should confirm separately.

A calculator or spreadsheet only automates these steps; it does not decide which limits apply. Treat any online calculator as a second opinion and match it against your own working paper, line by line.

New regime tax formula: slab by slab

Slab rates are marginal. Each rate applies only to the part of income that falls inside its band, never to the whole amount.

Here is why slab by slab matters. Applying the top slab's rate to all your income would overstate tax, and applying only an average rate to extra income would understate it. The marginal approach avoids both: the first rupees of income fall in the lower bands, and only the excess pays the higher rate.

Special-rate income deserves its own line on the sheet. Put it on a separate row, apply the rate you have confirmed for that type of income, and keep it out of the slab columns, so that a check of the slab working is not disturbed.

Step by step: from gross income to tax payable

1. 1Add up your income for FY 2026–27 by head: salary, interest, rent and other sources.
2. 2List the deductions you want to claim, each with its proof.
3. 3On the official portal, keep only those that the new regime allows for the year.
4. 4Subtract them to get taxable income.
5. 5Split taxable income across the slabs and multiply each part by its slab rate.
6. 6Check whether you meet the rebate conditions for the year, and subtract the rebate from the tax if you do.
7. 7Add surcharge if your income level triggers it, then add cess on the result.
8. 8Subtract tax already deducted or paid to see what is still payable or refundable.

Round only at the end, and note the source of every limit you use. A reviewer, or you next year, should be able to retrace each figure.

Do the arithmetic on paper once a year even if your employer's payroll does it for you. TDS is the employer's estimate based on a declaration, not a final liability. Your return is where the actual tax is settled, and any gap shows up as extra tax to pay or a refund.

Worked example: ₹10,00,000 of taxable income

Take a resident individual whose entire taxable income, after allowed deductions, is ₹10,00,000, all of it ordinary slab-rated income. To show the method without quoting limits that you must verify yourself, the slab limits are left as symbols.

Test your working by raising taxable income by ₹1,00,000 and recomputing. The extra tax is ₹1,00,000 multiplied by the rate of the band it lands in, plus cess, unless it crosses a boundary, in which case split it. That marginal figure is not your average rate.

Write the answer in three lines: tax on the slabs, tax after rebate and surcharge, and tax after cess. If a step looks surprisingly large or small, the cause is usually a wrong limit rather than wrong arithmetic, so check the limit first.

This example uses ₹10,00,000 only because it is a round figure. The method is identical for any taxable income: find the bands it covers, tax each part, then run the adjustments. The shape of the working never changes; only the limits do.

A working paper you can reuse

Keep one copy per financial year. When the rules for the next year are published, only the limits and rates change, so the layout is reusable.

Add a notes column when you build your own version. Record the notification or page you took each limit from and the date you read it. If a limit is later amended, you will know at once which workings need updating.

Mistakes that change the tax number

• Applying one marginal rate to the whole income instead of slab by slab.
• Using AY 2026–27 limits for AY 2027–28. A chart for the previous year can look identical and still be out of date.
• Treating the rebate as a deduction from income, when it comes off the tax.
• Running special-rate income through the ordinary slabs.
• Forgetting surcharge, or adding cess before surcharge.
• Claiming a deduction that the new regime does not allow.

Another subtle error is mixing financial-year and assessment-year language in one sheet. Pick one label for the columns and use it throughout, writing the other year in brackets. It costs nothing and prevents a mismatch with the return form.

If numbers change between a draft and the final return, such as a new bonus or a changed rent, redo the whole working paper rather than adjusting the last line. Each change can move income into a different slab.

To see whether the new regime is the cheaper choice for you, work the same income through the old regime as well. The old vs new tax regime page sets out that two-column comparison.