What is Section 115BAC of the Income Tax Act?

Section 115BAC is the provision that applies India’s new tax regime to individuals, Hindu Undivided Families and certain other non-corporate taxpayers. It offers lower slab rates with fewer deductions. From recent assessment years it is the default regime unless an eligible taxpayer opts out under the prescribed process.

Is income up to ₹12.75 lakh tax-free under Section 115BAC?

For salaried taxpayers, the Budget 2025 explanation says no income tax is payable up to ₹12.75 lakh because the ₹12 lakh rebate threshold is combined with a ₹75,000 standard deduction. This does not mean every type of income is tax-free, especially special-rate income such as capital gains.

What are the new-regime slabs for AY 2026-27?

For AY 2026-27, the official slabs are nil up to ₹4 lakh, then 5%, 10%, 15%, 20%, 25% and 30% across the ₹4–8 lakh, ₹8–12 lakh, ₹12–16 lakh, ₹16–20 lakh, ₹20–24 lakh and above ₹24 lakh bands. Add surcharge and cess where applicable.

Can I switch between old and new tax regimes every year?

If you do not have business or professional income, you can generally choose the regime annually in your return. If you have business or professional income, the process is stricter: Form 10-IEA is required by the due date and re-entry after opting out is limited.

What should I do before filing if my employer deducted TDS under the wrong regime?

Recalculate your final tax under both regimes before filing. If excess TDS was deducted, you may receive a refund after return processing. If too little was deducted, pay the balance with applicable interest if required. Keep salary slips, Form 16, AIS, Form 26AS and deduction proofs ready.

115BAC of Income Tax Act — Complete Guide to India’s New Tax Reg…

Section 115BAC — What Indian Taxpayers Need to Know First

Section 115BAC is the part of India’s Income-tax Act that runs the “new tax regime” for individuals, Hindu Undivided Families and certain other non-corporate taxpayers. For most salaried employees and first-time filers, the practical point is simple: the new regime is the default unless you opt out, and it gives lower slab rates while removing many deductions that people used under the old regime. This matters for Indian residents, returning NRIs and anyone with India-taxable salary, pension, rent, interest or business income. The most common early mistake is assuming “new regime means no tax up to ₹12.75 lakh for everyone.” That is not quite right: the Budget 2025 announcement linked the ₹12.75 lakh figure to salaried taxpayers because of the ₹75,000 standard deduction, and the Section 87A rebate is not available against special-rate income such as capital gains.

How to Decide Between the New and Old Tax Regime

Use Section 115BAC as a decision framework, not as a slogan. First, identify your taxpayer profile. Salaried employees and pensioners usually compare the new regime against the old regime by listing actual deductions: house rent allowance, Section 80C investments, health insurance under Section 80D, home-loan interest, education-loan interest and any other claim that is allowed only under the old regime. If you do not have large deductions, the new regime can be simpler because the slabs are wider and the paperwork is lighter. If you do have heavy deductions, the old regime may still be worth calculating before filing.

Second, use the correct assessment year. For AY 2026-27, the official Income Tax Department tax-rate page shows new-regime slabs of nil up to ₹4,00,000, 5% from ₹4,00,001 to ₹8,00,000, 10% from ₹8,00,001 to ₹12,00,000, 15% from ₹12,00,001 to ₹16,00,000, 20% from ₹16,00,001 to ₹20,00,000, 25% from ₹20,00,001 to ₹24,00,000, and 30% above ₹24,00,000. The same page states that, for AY 2026-27 onwards, resident individuals under Section 87A have a ₹12,00,000 rebate threshold, marginal relief, a maximum rebate of ₹60,000, and no rebate against tax on special income.

Third, know how opting out works. A salaried employee without business or professional income can generally choose between regimes each year while filing the return under Section 139(1). Someone with business or professional income has a stricter process and must furnish Form 10-IEA by the due date; once they opt out, re-entry is limited unless business income ceases. The decisions to make now are: estimate deductions honestly, separate normal income from special-rate income, and tell your employer the regime you want for tax deducted at source so monthly TDS does not surprise you.

Key Section 115BAC Numbers for AY 2026-27

Key numbers for AY 2026-27 under the new regime: ₹4,00,000 basic nil slab; ₹8,00,000, ₹12,00,000, ₹16,00,000, ₹20,00,000 and ₹24,00,000 slab breakpoints; 5%, 10%, 15%, 20%, 25% and 30% marginal rates after the nil slab; ₹12,00,000 Section 87A rebate threshold for eligible resident individuals; ₹60,000 maximum rebate; ₹75,000 standard deduction referenced in the Budget 2025 explanation for salaried taxpayers; and no rebate against tax on special-rate income. For help, the Income Tax e-filing/CPC helplines include 1800 103 0025 and 1800 419 0025, with international/paid alternatives +91-80-46122000 and +91-80-61464700.

Common Financial Mistakes Indian taxpayers comparing regimes Make in India — and How to Avoid Them

Mistake one: treating the new regime as automatically best. Always compare it with the old regime using your real deductions. Mistake two: ignoring special-rate income. Capital gains can still create tax even when salary appears within the rebate zone. Mistake three: telling your employer one regime for TDS and filing under another without planning cash flow; this can cause a refund delay or extra payment at filing. Mistake four: missing Form 10-IEA if you have business or professional income and want to opt out. Mistake five: clicking “tax refund” links in emails or messages. The Income Tax Department says it does not ask for PINs, passwords or similar financial access information by email.

Your India Financial Action Plan — What to Do and When

Make the regime choice before the filing rush. Keep a simple worksheet with salary, pension, interest, rent, capital gains and eligible deductions. Then run both regimes in the official portal or a reliable calculator, but do not enter bank credentials or OTPs into calculators or links sent by strangers. If your employer asks for a regime declaration, treat it as a TDS planning step, not the final legal choice for the year.

Day 1–7: list income by category: Separate salary, pension, rent, interest, business income and special-rate income such as capital gains before you compare regimes.
Week 1–2: total old-regime deductions: Add only deductions you can actually document, such as eligible rent, insurance or investment proofs; do not assume claims you cannot support.
Month 1: compare both regimes: Use the official e-filing portal or a reliable calculator to estimate liability under the new and old regimes for the correct assessment year.
Before employer declaration: plan TDS: Tell your employer the regime that best matches your estimate so monthly tax deduction is closer to your final liability.
Annually: review before filing: Recheck slabs, rebate rules, special income and Form 10-IEA requirements each year before filing because tax law and portal forms can change.

Official Resources and Where to Get Help in India

Official resources: Income Tax Department tax rates page for AY 2025-26 and AY 2026-27 slabs; Section 115BAC text on the Income Tax India portal; Section 87A text for rebate language; the e-filing portal contact page for helpdesk numbers and grievances; and the Income Tax Department phishing page for fraud warnings. Related MoneyWiki guides: Old vs new tax regime India, NRI income tax return guide, India capital gains tax basics.

115BAC of Income Tax Act — Complete Guide to India’s New Tax Regime (2026)