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The phrase “AY 2026-27” and “Tax Year 2026-27” refer to different legal periods. AY 2026-27 is the return year for income earned in FY 2025-26 and is governed by the Income-tax Act, 1961. Tax Year 2026-27 begins on 1 April 2026 and is governed by the Income-tax Act, 2025.

Tax slabs for the default new regime

For AY 2026-27, these rates apply under section 115BAC. The same slab structure continues under section 202 of the 2025 Act for Tax Year 2026-27. Health and education cess is 4%, and surcharge may apply at higher income levels.

For AY 2026-27, a resident individual under the default new regime can claim a section 87A rebate of up to ₹60,000 where total income does not exceed ₹12,00,000, with marginal relief for qualifying income slightly above ₹12,00,000. The corresponding rebate provision for Tax Year 2026-27 is section 156 of the Income-tax Act, 2025. Special-rate income is not covered in the same manner. A salaried taxpayer may have no tax on normal-rate salary up to ₹12,75,000 after the ₹75,000 standard deduction, subject to the statutory conditions.

Old-regime slabs for AY 2026-27

The old-regime section 87A rebate is limited to ₹12,500 where a resident individual's total income does not exceed ₹5,00,000.

Main differences

Who needs Form 10-IEA for AY 2026-27?

• Business or professional income: file Form 10-IEA by the due date under section 139(1) to opt out of the default new regime. Once opted out, the choice continues; re-entry is generally allowed only once, after which the old regime cannot be chosen again while business/professional income continues.
• No business or professional income: Form 10-IEA is not required. The regime can be selected in the ITR each year, subject to filing rules.

What happens under the Income-tax Act, 2025?

Section 202 makes the new regime the default from Tax Year 2026-27 and contains the corresponding option to use the normal provisions. Section 536 preserves valid options and actions taken under the repealed 1961 Act where the transition conditions are met. Taxpayers with an existing business-income regime history should retain Form 10-IEA acknowledgements and follow the form and portal procedure prescribed under the 2026 Rules.

A practical decision method

1. Estimate income under every head, including special-rate income.
2. List only deductions and exemptions for which documentary evidence exists.
3. Calculate tax under both regimes, including surcharge, cess, rebate and marginal relief.
4. Check loss set-off, brought-forward losses and AMT implications.
5. For business cases, confirm Form 10-IEA history before choosing.
6. Use the lower valid liability, but also consider recurring restrictions on switching.

Common mistakes

• Comparing slabs without removing deductions disallowed in the new regime.
• Assuming the ₹12 lakh rebate applies to all special-rate income.
• Filing Form 10-IEA after the due date.
• Confusing FY 2025-26 / AY 2026-27 with Tax Year 2026-27.
• Following the employer's TDS regime without recalculating the final return.

Conclusion

For AY 2026-27, compare section 115BAC with the old regime under the 1961 Act. For income from 1st April 2026, apply section 202 of the 2025 Act and preserve the transition history of any earlier option.