Complete Income Tax Chart Covering Finance Act, 2026

Quick Summary

• The Finance Act, 2026 was notified on March 30, 2026, and the Income-tax Rules, 2026 came into force on April 1, 2026, under section 533 of the Income-tax Act, 2025.
• New regime slab rates for Tax Year 2026-27 range from nil (up to ₹4 lakh) to 30% (above ₹24 lakh), with a Section 87A rebate of ₹60,000 for income up to ₹12 lakh.
• The old regime continues with basic exemption limits of ₹2.5 lakh (individuals below 60), ₹3 lakh (senior citizens), and ₹5 lakh (super senior citizens), with a Section 87A rebate of ₹12,500 for income up to ₹5 lakh.
• Surcharge rates range from 10% to 37% across income brackets of ₹50 lakh to above ₹5 crore, with Health and Education Cess at 4% on tax plus surcharge.
• Key TDS changes effective April 1, 2026, include Section 194T (10% on partner payments above ₹20,000), revised TCS rates, and updated thresholds under Sections 194Q and 194R.
• The Income Tax Act, 2025 replaces the 1961 Act with 536 sections and introduces the concept of “tax year” from April 1, 2026, eliminating the separate “assessment year” terminology.

What Are the Key Income Tax Changes Under Finance Act, 2026?

The Finance Act, 2026 brings substantial modifications to the direct tax landscape, affecting individual taxpayers, businesses, and compliance procedures. Understanding these changes is essential for accurate tax planning and timely compliance.

The new tax regime under Section 115BAC has been revised with effect from Tax Year 2026-27. The slab rates now start with nil tax for income up to ₹4 lakh, followed by 5% for ₹4-8 lakh, 10% for ₹8-12 lakh, 15% for ₹12-16 lakh, 20% for ₹16-20 lakh, 25% for ₹20-24 lakh, and 30% for income above ₹24 lakh, as per the revised slab structure under Section 115BAC applicable from Tax Year 2026-27.

How Do the Old and New Tax Regimes Compare for Individual Taxpayers?

The choice between the old and new tax regimes remains one of the most critical decisions for individual taxpayers and HUFs. While the new regime offers lower slab rates and a higher rebate, the old regime continues to benefit those with substantial investments in tax-saving instruments and housing loans.

Under the old regime, the basic exemption limit stays at ₹2.5 lakh for individuals below 60 years, ₹3 lakh for senior citizens aged 60-80 years, and ₹5 lakh for super senior citizens above 80 years. The Section 87A rebate under the old regime remains at ₹12,500 for total income up to ₹5 lakh, providing modest relief to lower-income taxpayers who prefer retaining deductions under Sections 80C, 80D, and 24(b).

Consider a practical example: Mr. Sharma, aged 35, earns a gross salary of ₹15 lakh with ₹1.5 lakh invested in PPF and ELSS under Section 80C, ₹25,000 paid as health insurance premium under Section 80D, and ₹2 lakh as home loan interest. Under the old regime, his taxable income reduces to ₹11,25,000 after deductions, resulting in a tax liability of approximately ₹1,42,500 before cess. Under the new regime, with no deductions but a standard deduction of ₹75,000 and the enhanced Section 87A rebate of ₹60,000, his tax on ₹14,25,000 works out to approximately ₹1,53,000 before cess. The old regime saves him roughly ₹10,500 in this scenario, demonstrating why high-investment taxpayers must evaluate both options before filing.

What Are the Key TDS Changes Effective from April 1, 2026?

The Finance Act, 2026 has introduced several significant modifications to Tax Deducted at Source provisions that affect both resident and non-resident taxpayers. These changes, effective from April 1, 2026, require businesses and individuals to update their compliance processes immediately.

Section 194T is one of the most notable additions, imposing a 10% TDS on payments made by partnership firms to their partners in the nature of salary, remuneration, commission, bonus, or interest. This provision applies only when the aggregate of such sums paid or payable during the financial year exceeds ₹20,000. The introduction of Section 194T aims to bring partner payments under the TDS umbrella, which was previously a grey area with limited withholding obligations. Partnership firms must now carefully track all partner payments and ensure timely deduction to avoid disallowance under Section 40(a)(ia).

The Finance Act, 2026 has also rationalized Tax Collected at Source (TCS) rates under multiple provisions to provide uniform rates wherever possible. TCS on overseas tour packages, Liberalised Remittance Scheme remittances, and sale of goods have been streamlined to reduce compliance complexity. These changes are effective from April 1, 2026, and apply to transactions undertaken during the tax year 2026-27. Businesses engaged in cross-border transactions, e-commerce operations, and international remittances must review their TCS collection mechanisms to align with the revised rates and avoid short-collection demands during assessment proceedings.

How Are Capital Gains Taxed Under the Finance Act, 2026?

The Finance Act, 2026 retains the bifurcated capital gains taxation framework distinguishing between short-term capital gains (STCG) and long-term capital gains (LTCG) based on holding periods specific to each asset class. For listed equity shares and equity-oriented mutual funds, the holding period threshold for long-term classification remains 12 months, while for debt-oriented mutual funds and other assets, the threshold varies. The Income-tax Act, 1961 provides the statutory framework for computing capital gains under Sections 45 to 55A, with specific rate schedules prescribed in the Finance Act, 2026.

Short-term capital gains on listed equity shares and equity-oriented mutual funds, where Securities Transaction Tax (STT) has been paid, are taxed at a special rate of 15% under Section 111A of the Income-tax Act, 1961. Long-term capital gains on the same category are taxed at 10% on gains exceeding Rs. 1 lakh under Section 112A. For listed bonds and debentures, the holding period for long-term classification is 12 months, with gains computed after indexation benefits where applicable under the old regime. REITs and InvITs listed on recognized stock exchanges follow the same holding period and rate structure as equity shares when STT has been paid on the transaction.

For foreign securities and assets held by non-residents, the applicable holding period and rate structure depends on the nature of the asset and the residential status of the taxpayer. Under Section 115AD of the Income-tax Act, 1961, Foreign Institutional Investors are taxed at special rates on various categories of income including capital gains. The Finance Act, 2026 specifies the exact rates applicable to each category of capital gains, with concessional treatment for certain asset classes to promote investment in Indian securities markets.

Exemption provisions for capital gains remain available under Sections 54, 54EC, 54F, and other specified sections of the Income-tax Act, 1961, subject to conditions including reinvestment in specified assets within prescribed timelines. These exemptions are generally not available under the new regime, as Section 115BAC(1A) requires taxpayers to forgo most exemptions and deductions. Taxpayers must carefully evaluate whether to claim capital gains exemptions under the old regime or opt for the lower slab rates under the new regime, based on their overall income composition and investment plans.

How Do Surcharge and Cess Apply Across Different Income Levels?

Surcharge and Health and Education Cess represent additional levies that significantly impact the effective tax rate for high-income taxpayers. Understanding the slab-wise surcharge structure and the interaction with marginal relief provisions is essential for accurate tax computation and advance tax planning.

Surcharge is levied on the amount of income-tax at progressive rates based on total income brackets. For individuals, HUFs, AOPs, BOIs, and artificial juridical persons, the surcharge rates are 10% for income between ₹50 lakh and ₹1 crore, 15% for income between ₹1 crore and ₹2 crore, 25% for income between ₹2 crore and ₹5 crore, and 37% for income exceeding ₹5 crore. These rates apply uniformly under both the old and new tax regimes, ensuring that higher income levels attract proportionally higher tax burdens. Health and Education Cess is then calculated at 4% of the sum of income-tax and surcharge, bringing the effective surcharge rates to 10.4%, 15.6%, 26%, and 38.48% respectively for the four income brackets.

Marginal relief provisions ensure that the additional tax liability due to surcharge does not exceed the amount by which income exceeds the threshold limit. For instance, if a taxpayer’s total income is ₹1.02 crore, the surcharge of 10% would normally apply, but marginal relief ensures that the incremental tax burden is limited to the additional ₹2 lakh above the ₹1 crore threshold. This mechanism prevents situations where crossing a surcharge threshold results in a net decrease in take-home income. Taxpayers with income near threshold limits must compute both the regular tax with surcharge and the marginal relief-adjusted tax to determine their correct liability, particularly when making advance tax payments due on June 15, September 15, December 15, and March 15 of each tax year.

How Does the Income Tax Act, 2025 Change Compliance for Tax Year 2026-27?

The Income Tax Act, 2025, which replaces the Income-tax Act, 1961 effective April 1, 2026, introduces a fundamental shift in terminology and compliance framework through the concept of “tax year.” Under section 536 of the Income Tax Act, 2025, the terms “previous year” and “assessment year” have been discontinued and replaced with a single “tax year” concept that corresponds directly to the financial year. This means income earned during FY 2026-27 is now referred to as Tax Year 2026-27, eliminating the dual-year confusion that existed under the old Act.

The transition is managed through section 536(2)(c) of the Income Tax Act, 2025, which provides that the repealed 1961 Act continues to apply to all proceedings in respect of tax years beginning before April 1, 2026. This means assessments, appeals, and penalty proceedings for AY 2026-27 and earlier years will continue under the old Act’s procedures. Meanwhile, advance tax payments, TDS deductions, and TCS collections for Tax Year 2026-27 are governed by the new Act. The e-filing portal at incometax.gov.in now facilitates compliance under both Acts concurrently, and circulars issued under the old Act remain valid under section 536(2)(j) of the new Act as long as they do not conflict with its provisions.

The new Act contains 536 sections and 16 schedules compared to 819 sections and 14 schedules under the 1961 Act, with cross-references made clearer and more direct. The Income-tax Rules, 2026, notified under section 533 of the Income-tax Act, 2025, contain 333 rules and 190 forms, down from 511 rules and 399 forms previously. Presumptive taxation schemes for businesses under Section 44AD, professionals under Section 44ADA, and goods carriage operators under Section 44AE have been consolidated into a single section (section 58) in tabular form, adopting simplified language for easier compliance.

What Are the Tax Rates for Companies, Firms, and Co-operative Societies?

Corporate taxation under the Finance Act, 2026 offers multiple regimes with varying rates based on turnover, manufacturing activity, and specific incentives. Domestic companies with total turnover or gross receipts not exceeding ₹400 crore in the Tax Year 2023-24 are taxed at 25%, while other domestic companies pay 30%. Companies opting for concessional regimes under Section 115BA pay 25%, those under Section 115BAA pay 22%, and new manufacturing companies under Section 115BAB pay 15%, subject to specified conditions regarding exemptions and deductions. For companies opting for Section 115BAA or Section 115BAB, a flat surcharge of 10% applies, irrespective of the income level.

Partnership firms and LLPs are taxed at a flat 30% on total income, with surcharge applicable at 12% where total income exceeds ₹1 crore. Foreign companies pay 35% on most income, with a special rate of 50% applying to certain royalty and technical service fees received from Indian concerns under agreements approved by the Central Government. Surcharge for foreign companies is 2% for income between ₹1 crore and ₹10 crore, and 5% for income exceeding ₹10 crore. Co-operative societies are taxed at slab rates of 10% up to ₹10,000, 20% from ₹10,001 to ₹20,000, and 30% above ₹20,000. An alternative regime under Section 115BAD offers a 22% rate if specified exemptions are foregone. Surcharge for co-operative societies is 7% for income between ₹1 crore and ₹10 crore, and 12% for income exceeding ₹10 crore.

Consider a practical example: XYZ Pvt Ltd, a domestic manufacturing company with turnover of ₹350 crore in Tax Year 2023-24, earns total income of ₹5 crore for Tax Year 2026-27. At the 25% rate applicable under the turnover-based regime, the tax liability is ₹1,25,00,000. With surcharge at 7% (for income between ₹1 crore and ₹10 crore) amounting to ₹8,75,000, and Health and Education Cess at 4% on tax plus surcharge (₹5,35,000), the total tax outflow is ₹1,39,10,000, yielding an effective tax rate of 27.82%. If the company had opted for Section 115BAA at 22%, the tax would be ₹1,10,00,000 plus a flat 10% surcharge (₹11,00,000) and 4% cess (₹4,84,000), totaling ₹1,25,84,000. This would result in a saving of approximately ₹13,26,000 compared to the standard 25% regime. However, the Section 115BAA regime requires foregoing deductions under Section 80C equivalents and other specified incentives, making the choice dependent on the company’s specific investment and depreciation profile.

Minimum Alternate Tax (MAT) under Section 115JB applies to companies where tax liability is less than 14% of book profit for Tax Year 2026-27, while Alternate Minimum Tax (AMT) under Section 115JC applies to non-corporate assessees where tax is less than 18.5% of adjusted total income. Both provisions ensure a minimum tax base and require careful computation alongside regular tax liability to determine the final payable amount.

What Actions Should You Take Next?

1. Compare your tax liability under both regimes using actual deduction amounts before selecting the regime for Tax Year 2026-27.
2. Review advance tax instalments for June, September, and December 2026 to ensure they reflect the revised slab rates and surcharge brackets.
3. Download the complete income tax chart covering Finance Act, 2026 from the Income Tax Department portal for year-round reference.
4. Verify your employer applied the correct Section 87A rebate of ₹60,000 if you opted for the new regime with income up to ₹12 lakh.
5. Check TDS certificates and Form 16 for Tax Year 2026-27 reflect the applicable surcharge rate based on your income bracket.
6. Consult a tax professional if your income exceeds ₹50 lakh to evaluate marginal relief implications and optimal regime selection.

Frequently Asked Questions

Sources

• TaxGuru — Complete Income Tax Chart Covering Finance Act, 2026
• Income Tax India — Tax Rates Chart
• Income Tax India — Income-tax Rules, 2026
• TaxGuru — Complete Income Tax Rate Guide Tax Year 2026-27
• Income Tax India — Notification 22/2026
• TaxGuru — Complete TDS Rate Chart Tax Year 2026-27
• TaxGuru — Finance Act 2026: 56 Key Amendments
• Income Tax Portal — Objective and Scope of the New Act

Take action today: Review your income projections for Tax Year 2026-27, compute tax liability under both regimes, and communicate your regime choice to your employer before the first TDS deduction. Early preparation prevents last-minute errors and avoids interest and penalty exposure.