India Tax Reform 2026: What Actually Changes for Salaried Employees
By Vyuhantrix Finance Desk•July 2026•7 min read
The landscape of personal taxation in India has undergone a decisive shift. With the New Tax Regime officially established as the default choice for Assessment Year 2026-27, taxpayers are faced with a straightforward question: Are traditional tax-saving investments still worth it?
1. Key Changes Introduced in FY 2025-26 / AY 2026-27
- Higher Basic Exemption Limit: Income up to ₹4,00,000 is now taxed at 0% under the New Tax Regime.
- Increased Standard Deduction: Salaried individuals enjoy a flat ₹75,000 standard deduction under the new regime (up from ₹50,000).
- Expanded Section 87A Rebate: Taxable income up to ₹12,00,000 qualifies for full rebate, effectively meaning zero tax liability for income up to ₹12.75 Lakhs (inclusive of standard deduction).
2. New Tax Regime Slab Structure
| Income Slab | Tax Rate |
|---|---|
| ₹0 – ₹4,00,000 | NIL |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
3. Which Regime Should You Choose?
Unless you have massive home loan interest deductions (Section 24b) and high HRA allowances exceeding ₹3.5–4 Lakhs annually, the New Tax Regime almost universally yields lower net tax outgo for middle-income earners due to the wider slab bandwidths.
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