Section 202

Under Section 202 of the Income Tax Act 2025, the new tax regime slabs for Tax Year 2026-27 (effective 1 April 2026) are: Up to ₹4 lakh — NIL; ₹4–8 lakh — 5%; ₹8–12 lakh — 10%; ₹12–16 lakh — 15%; ₹16–20 lakh — 20%; ₹20–24 lakh — 25%; Above ₹24 lakh — 30%. With the Section 156 rebate of ₹60,000, total income up to ₹12 lakh has effectively zero tax. For salaried employees, the ₹75,000 standard deduction means zero tax up to a gross salary of ₹12,75,000.

Yes — the new tax regime under Section 202 is the DEFAULT regime from Tax Year 2026-27. All individual taxpayers, HUFs, AOPs, and BOIs are automatically in this regime unless they explicitly opt out. For salaried employees, the opt-out can be exercised each year at ITR filing. For business taxpayers, the switch to old regime can be made only once by filing Form 10IEA before the ITR due date — and once back in old regime, they cannot switch to new regime again.

Major deductions not available under the new tax regime include: Section 123 (80C equivalent) — LIC, PPF, ELSS, home loan principal, NSC — ₹1.5 lakh cap; Section 126 (80D equivalent) — health insurance premium; HRA exemption; LTA exemption; Interest on self-occupied home loan (₹2 lakh cap under Section 22(1)(b)); Employee's own NPS contribution (Section 119(1) and 119(1B)); Most Chapter VI-A deductions — 80G (donations), 80E (education loan), 80TTA (savings account interest); Set-off of house property loss against salary.

Deductions available under Section 202 (new tax regime): (1) Standard deduction — ₹75,000 for salaried; ₹25,000 for family pensioners; (2) Employer's NPS contribution — up to 14% of salary (govt employees) or 10% (others); (3) Interest on let-out property home loan — full interest deductible with no annual cap; (4) Family pension deduction — lower of ₹25,000 or 1/3rd of pension; (5) Agniveer Corpus Fund contribution; (6) Depreciation under Section 33 (except additional depreciation); (7) Deductions for IFSC units. All other deductions are blocked.

The right choice depends on your total deductions. New regime wins if: your deductions are below ₹3.75 lakh (for a ₹15 lakh salary), you lack a home loan or large LIC/ELSS investments, and you prefer simplicity. Old regime wins if: you have Section 123 (80C) investments of ₹1.5 lakh, Section 126 (80D) health insurance, home loan interest (self-occupied ₹2 lakh), HRA exemption, and total deductions exceed ₹4–5 lakh. For incomes up to ₹12 lakh, the new regime almost always wins due to the zero-tax rebate. Use a tax calculator to compare your specific numbers.

For a gross salary of ₹15 lakh under the new tax regime (Section 202) for Tax Year 2026-27: Step 1 — Deduct standard deduction ₹75,000 → taxable income = ₹14,25,000. Step 2 — Apply slabs: ₹0–4 lakh = ₹0; ₹4–8 lakh @ 5% = ₹20,000; ₹8–12 lakh @ 10% = ₹40,000; ₹12–14.25 lakh @ 15% = ₹33,750. Total tax = ₹93,750. Add 4% cess = ₹3,750. Total liability = ₹97,500. No rebate (income > ₹12 lakh). This is significantly lower than the old regime if your deductions are less than approximately ₹3.5 lakh.

For ₹20 lakh gross salary under the new tax regime for Tax Year 2026-27: After ₹75,000 standard deduction, taxable income = ₹19,25,000. Tax computation: ₹0–4L = ₹0; ₹4–8L @5% = ₹20,000; ₹8–12L @10% = ₹40,000; ₹12–16L @15% = ₹60,000; ₹16–19.25L @20% = ₹65,000. Total tax = ₹1,85,000. Add 4% cess = ₹7,400. Total = ₹1,92,400. Under old regime with maximum deductions (₹1.5L 80C + ₹25,000 80D + ₹2L home loan + ₹75,000 std deduction = ₹4.5L deductions), taxable income = ₹15.5L → old regime tax ≈ ₹2,62,500 + cess. New regime saves approximately ₹73,000 even with maximum common deductions at ₹20L.

Under Section 202 of the Income Tax Act 2025, Hindu Undivided Families (HUFs) are now explicitly covered by the new tax regime — this is a change from Section 115BAC of ITA 1961 which initially covered only individuals. HUFs are subject to the same slab structure (0% to 30%) and the same default regime rule. The Section 156 rebate (zero tax up to ₹12 lakh) also applies to HUFs. Key difference: HUFs cannot claim HRA exemption or LTA — those are individual-specific — but the loss of Section 123 (80C) investments is a significant disallowance. HUFs with large business income may prefer the old regime if eligible deductions under Chapter VI-A were substantial.

Under the new tax regime (Section 202), only the EMPLOYER's NPS contribution is deductible — not the employee's own contribution. Specifically: Employer's NPS contribution up to 14% of salary (government employees) or 10% of salary (private employees) remains deductible under Section 119(2). However, the employee's own NPS contribution under Section 119(1) (equivalent to 80CCD(1)) and the additional ₹50,000 NPS deduction under Section 119(1B) (equivalent to 80CCD(1B)) are NOT allowed under the new regime. So the strategy is: maximise employer NPS contribution (negotiate salary structure) while choosing the new regime.

No — the regime choice is finalised at the time of filing your ITR. You cannot change the regime after the ITR is filed for that year. For salaried employees: you can switch regime each year before or at the time of ITR filing (you can inform your employer mid-year, but final choice is at ITR). For business taxpayers (those with income under 'profits and gains of business or profession'): the old regime opt-out via Form 10IEA is a one-time choice — once you switch to old regime, you cannot revert to new regime again in subsequent years (except if you stop having business income). Make sure to compare your tax liability before filing.

Under Section 202 of the Income Tax Act 2025, the surcharge is capped at a maximum of 25% — even for incomes exceeding ₹5 crore. This was a change made in Budget 2023 (reducing from 37% for the highest income bracket) and is now embedded in ITA 2025. The full surcharge structure: income above ₹50 lakh → 10%; above ₹1 crore → 15%; above ₹2 crore → 25%; above ₹5 crore → 25% (capped, no further increase). The cap is the same for both new and old regimes. On capital gains (LTCG / STCG), surcharge is separately capped at 15%.

The zero tax benefit works through two separate provisions, not a single exemption: (1) Standard deduction of ₹75,000 under Section 19 — reduces gross salary to taxable income. (2) Section 156 rebate of ₹60,000 — applicable only if total taxable income does not exceed ₹12 lakh. For a salaried person earning exactly ₹12,75,000 gross: Taxable income = ₹12,75,000 − ₹75,000 = ₹12,00,000. Tax on ₹12 lakh = ₹60,000 (computed on slabs). Rebate under Section 156 = ₹60,000. Net tax = ₹0. Important: if gross salary exceeds ₹12,75,000 by even ₹1, the rebate is lost entirely and full tax on ₹12L+ becomes payable — a cliff effect to be aware of.

No — the Section 156 rebate does NOT apply to special rate incomes. If your income includes capital gains taxed at special rates (e.g., LTCG at 12.5% under Section 112A, STCG at 20%), those gains are excluded from the rebate computation. Specifically: if your total income = ₹10 lakh normal income + ₹3 lakh LTCG, the total exceeds ₹12 lakh and the rebate is entirely lost. The ₹12 lakh threshold is for 'total income' — so even ₹1 of taxable income above ₹12 lakh (from any source) disqualifies the rebate. Investors with long-term capital gains should factor this into their tax planning.

Home loan borrowers need to carefully evaluate the new regime because: (1) Interest on SELF-OCCUPIED property — the ₹2 lakh annual deduction under Section 22(1)(b) is NOT available under the new regime; (2) Home loan PRINCIPAL repayment — deduction under Section 123 (80C equivalent) is NOT available; (3) Interest on LET-OUT property — full interest with NO cap IS deductible under Section 22(1)(a) (this is available even under new regime). For self-occupied borrowers with ₹2 lakh annual home loan interest + ₹1.5 lakh 80C investments: that's ₹3.5 lakh of lost deductions. The old regime typically wins for active home loan borrowers with self-occupied property, especially on salaries of ₹15–30 lakh.