What is Income Tax? Meaning, Rules, Tax Slabs, Types and Tax Guide for Tax Year 2026-27
CA Meet Dhrangadhariya 
August 11, 2026
CA Meet Dhrangadhariya August 11, 2026
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Last updated: 11 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
Income tax is the most important direct tax in India. It is charged on the income a person earns in a year, and it is administered by the Central Board of Direct Taxes (CBDT). Income earned up to 31 March 2026 (FY 2025-26, AY 2026-27) is taxed under the Income-tax Act, 1961. From 1 April 2026 a new law, the Income-tax Act, 2025, applies, and income is reported for a “Tax Year” (see our note on the Tax Year). Individuals can choose between the new and the old tax regime.
Income tax is a tax on the income earned by a person in a year. The rate depends on the amount of income, the type of taxpayer and, for individuals, the regime chosen.
The person who is liable to pay tax or any other sum under the Act is called the assessee. The Act recognises these kinds of persons:
Under Article 265 of the Constitution, no tax can be levied or collected except under the authority of law. The rules for computing income, deductions, rates, surcharge, cess, due dates and penalties are in the Income-tax Act. After more than six decades of amendments the 1961 Act had become long and hard to follow, so the Income-tax Act, 2025 replaced it from 1 April 2026 with a simpler structure. Section numbers have changed, but most of the rates and rules are carried over.
Income is computed under five heads: salary, income from house property, profits and gains of business or profession, capital gains, and income from other sources.
Individuals and HUFs are taxed on slab rates. The new regime is the default; an individual may opt for the old regime. Budget 2026 did not change the slab rates.
| Total income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
| Total income | Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
The basic exemption limit is ₹3 lakh for resident senior citizens (60 to 79 years) and ₹5 lakh for resident super senior citizens (80 years and above) in the old regime. The standard deduction is ₹50,000 for salaried taxpayers and pensioners. The old regime allows many deductions and exemptions; the new regime allows very few.
A surcharge is added to the tax of high-income individuals, and health and education cess of 4% is added on the tax plus surcharge. In the new regime the surcharge is capped at 25%.
| Income type | Rate |
|---|---|
| Long-term capital gains on listed equity shares and equity mutual funds (held over 12 months) | 12.5% on gains above ₹1.25 lakh in a year |
| Short-term capital gains on listed equity shares and equity mutual funds | 20% |
| Long-term capital gains on other assets such as property and gold (held over 24 months) | 12.5% without indexation |
| Winnings from lotteries, game shows, online games and betting | 30% flat |
| Income from transfer of virtual digital assets (crypto assets) | 30% flat |
Debt mutual funds bought after 1 April 2023 and certain similar investments are taxed at your slab rate and not at the rates above.
The following popular deductions are mainly available in the old regime:
The employer’s contribution to NPS under section 80CCD(2) is allowed in both regimes, up to 10% of salary in the old regime and 14% in the new regime. Under the Income-tax Act, 2025 these deductions carry new section numbers.
Form 16, Form 26AS, the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS), bank statements and interest certificates, proof of deductions, and your bank account details.
The due dates are fixed each year and can be extended by the CBDT. For AY 2026-27 the usual dates were:
| Taxpayer | Due date |
|---|---|
| Individuals and others not requiring audit | 31 July 2026 |
| Taxpayers whose accounts require audit | 31 October 2026, extended to 21 November 2026 |
| Taxpayers with transfer pricing reports | 30 November 2026 |
For the audit extension see our note on the ITR deadline extension for AY 2026-27. Late filing attracts a fee and interest.
Income tax rules change often, especially around the move to the Income-tax Act, 2025. Choose the regime that suits you each year, keep your records ready, meet the due dates and take advice from a qualified professional where needed.
Income tax is a direct tax charged on the income a person earns in a year. In India it is administered by the Central Board of Direct Taxes and levied under the Income-tax Act.
The new tax regime is the default. An individual can opt for the old regime, which allows deductions such as section 80C but has higher slab rates.
In the new regime, a resident individual with total income up to ₹12 lakh pays no tax because of the section 87A rebate of up to ₹60,000. Salaried taxpayers get a further ₹75,000 standard deduction. Special-rate capital gains are not covered by the rebate.
For AY 2026-27 the due date was 31 July 2026 for taxpayers not requiring audit, and 31 October 2026 for audit cases, extended to 21 November 2026. Due dates are fixed each year and can be extended.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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