Income Tax Rates for Financial Year 2025-26 / AY 2026-27

The Indian income tax structure for the assessment years 2025-26 and 2026-27 is defined by two primary systems for individuals and certain entities, supplemented by fixed rates for firms and corporations. Under the Old Tax Regime, tax slabs for individuals, HUFs, AOPs, BOIs, and AJPs maintain a maximum rate of 30% on income above ₹10,00,000. This regime continues to provide differential basic exemption limits based on age: ₹2,50,000 for general individuals, ₹3,00,000 for resident senior citizens, and ₹5,00,000 for resident super senior citizens. In contrast, the Alternative Tax Regime under Section 115BAC has become the default tax regime and features a graded slab structure with a lower tax burden but requires foregoing various deductions. The basic exemption limit under this default regime is set at ₹3,00,000 for AY 2025-26, and is scheduled to increase to ₹4,00,000 for AY 2026-27, which also introduces a more granular slab structure with up to seven tax brackets, peaking at 30% for income over ₹24,00,000. Furthermore, under this default regime, a resident individual with income up to ₹7,00,000 can claim a maximum rebate of ₹25,000 under Section 87A for AY 2025-26, which is proposed to increase to a ₹60,000 rebate for income up to ₹12,00,000 from AY 2026-27. Beyond individuals, the tax rates for entities are generally fixed but also offer special concessional regimes. Partnership firms (including LLPs) and Local Authorities are subject to a flat tax rate of 30%. Domestic Companies are taxed at either 25% (if turnover in a specified preceding year does not exceed ₹400 crore) or 30% otherwise. However, domestic companies have access to highly reduced corporate rates: 25% under Section 115BA, 22% under Section 115BAA, and 15% under Section 115BAB (for new manufacturing companies), provided they forgo certain deductions. Similarly, Co-operative Societies face tiered rates (10%, 20%, 30%), but can opt for a flat 22% rate under Section 115BAD or a 15% rate under Section 115BAE for new manufacturing activities. Foreign Companies are taxed at 35% on general income, with a higher rate of 50% for specific royalty and technical service fee income earned through certain older agreements.

Tax Rates

1. In case of an Individual (resident or non-resident) or HUF or Association of Person or Body of Individual or any other artificial juridical person

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a. Surcharge :Surcharge is levied on the amount of income-tax at following rates if total income of an assessee exceeds specified limits:-

Note:

(1) The enhanced surcharge of 25% & 37%, as the case may be, is not levied, on dividend income or income chargeable to tax under sections 111A, 112, 112A and 115AD(1)(b). Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

(2) The surcharge rate for AOP with all members as a company, shall be capped at 15%.

(3) The surcharge rate is nil if the total income of a ‘specified fund’ as referred to in section 10(4D) includes any income in respect of securities as given under section 115AD(1)(a).

Marginal relief is available from surcharge in following manner-i.  in case where net income exceeds Rs. 50 lakh but doesn’t exceed Rs. 1 Crore, the amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs 50 Lakh by more than the amount of income that exceeds Rs 50 Lakhs.

ii.  in case where net income exceeds Rs. 1 crore but doesn’t exceed Rs. 2 crore, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

iii.  in case where net income exceeds Rs. 2 crores but doesn’t exceed Rs. 5 crores, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 2 crores by more than the amount of income that exceeds Rs. 2 crores.

iv.  in case where net income exceeds Rs. 5 crores, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 5 crores by more than the amount of income that exceeds Rs. 5 crores.

b.Health and Education Cess :Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.

Notes:

(1) The Health and Education Cess is nil if the total income of a ‘specified fund’ as referred to section 10(4D) includes any income in respect of securities as given under section 115AD(1)(a).

(2) A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 12,500, whichever is less.

Alternate Minimum Tax (AMT)

An individual is liable to pay Alternate Minimum Tax where tax payable by him, on his total income computed as per normal provisions of the Act, is less than 18.5% of ‘adjusted total income’. In such a case the ‘adjusted total income’ is taken as income of such individual and he shall be liable to pay tax at the rate of 18.5% of such ‘adjusted total income’.

However, AMT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of an assessee other than a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange.

1.1. Special tax Rate for Individual, HUF, AOP, BOI or AJP

The Finance Act 2020 inserted Section 115BAC, with effect from the assessment year 2021-22, to provide for an alternative regime providing for lower tax rates in the case of an individual or a Hindu undivided family (HUF). The Finance Act, 2023 extends the scope of this regime to AOP, BOI, and AJP as well and makes it a default tax regime. However, an assessee has to forego various exemptions and deductions for claiming the benefit of reduced tax rates under this regime.

The tax rates under the this regime are as under:

For Assessment Year 2025-26:

For Assessment Year 2026-27:

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a. Surcharge :Surcharge is levied on the amount of income-tax at following rates if total income of an assessee exceeds specified limits:-

Note: The enhanced surcharge of 25% is not levied, on income by way of dividend or from income chargeable to tax under sections 111A, 112, 112A and 115AD(1)(b). Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%. Also, the surcharge rate for AOP with all members as a company, shall be capped at 15%.

Further, the surcharge rate is nil if the total income of a ‘specified fund’ as referred to in section 10(4D) includes any income in respect of securities as given under section 115AD(1)(a) .

However, marginal relief is available from surcharge in following manner-i.  in case where net income exceeds Rs. 50 lakh but doesn’t exceed Rs. 1 Crore, the amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs 50 Lakh by more than the amount of income that exceeds Rs 50 Lakhs.

ii.  in case where net income exceeds Rs. 1 crore but doesn’t exceed Rs. 2 crore, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

 iii. in case where net income exceeds Rs. 2 crores, marginal relief shall be available from surcharge in such a manner that the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 2 crores by more than the amount of income that exceeds Rs. 2 crores.

b. Health and Education Cess :Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge. However, The Health and Education Cess is nil if the total income of a ‘specified fund’ as referred to section 10(4D)includes any income in respect of securities as given under section 115AD(1)(a).

Notes:

(a) A maximum rebate of Rs. 25,000 is allowed under section 87A, if the total income of a resident individual, who is opting for the new tax scheme under Section 115BAC(1A), is up to Rs. 7,00,000 [Applicable for AY 2025-26].

(b) A maximum rebate of Rs. 60,000 is allowed under section 87A, if the total income of a resident individual, who is opting for the new tax scheme under Section 115BAC(1A), is up to Rs. 12,00,000 [Applicable from AY 2026-27].

Note: The total rebate under section 87A shall not exceed the amount of income tax payable as per the rates provided in section 115BAC(1A) [effective from AY 2026-27]

(c) Further, if the total income of the resident individual chargeable to tax section 115BAC(1A) exceeds Rs. 7 or 12 lakhs and the tax payable on such income exceeds the difference between the total income and Rs. 7 or 12 lakhs he can claim a rebate with marginal relief to the extent of the difference between the tax payable on such total income and the amount of income by which it exceeds Rs. 7 or 12 lakhs.

(c) If an assessee has opted for new tax regime, the provisions of AMT shall not be applicable.

2. Partnership Firm

A partnership firm (including LLP) is taxable at 30%.

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(a) Surcharge : The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

(b) Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge

Alternate Minimum Tax (AMT)

A partnership firm is liable to pay Alternative Minimum Tax where tax payable by it, on total income computed as per normal provisions of the Act, is less than 18.5% of ‘adjusted total income’. In such a case the ‘adjusted total income’ is taken as the income of the firm and it shall be liable to pay tax at the rate of 18.5% of such ‘adjusted total income’.

However, AMT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of an assessee other than a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange.

3. Local Authority

A local authority is taxable at 30%.

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(a)  Surcharge : The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

(b)  Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

Alternate Minimum Tax (AMT)

A Local Authority is liable to pay Alternative Minimum Tax where tax payable by it, on total income computed as per normal provisions of the Act, is less than 18.5% of ‘adjusted total income’. In such a case the ‘adjusted total income’ is taken as the income of the firm and it shall be liable to pay tax at the rate of 18.5% of such ‘adjusted total income’.

However, AMT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange.

4. Domestic Company

Income-tax rates applicable in case of domestic companies for assessment years 2026-27 and 2025-26 are as follows:

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(a) Surcharge : The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees. The surcharge shall be subject to marginal relief, which shall be as under:

(i)  Where income exceeds Rs. 1 crore but not exceeding Rs. 10 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

(ii)  Where income exceeds Rs. 10 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore

(b) Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

Minimum Alternate Tax (MAT)

A domestic company is liable to pay Minimum Alternate Tax where tax payable by it, on total income computed as per normal provisions of the Act, is less than 15% of ‘book profit’. In such a case the ‘book profit’ is taken as the income of the company and it shall be liable to pay tax at the rate of 15% of such ‘book profit’.

However, MAT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange.

4.1. Special Tax rates applicable to a domestic company

The special Income-tax rates applicable in case of domestic companies are as follows:

Surcharge : The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be flat 10% irrespective of amount of total income.

Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

MAT : The domestic company who has opted for special taxation regime under Section 115BAA & 115BAB is exempted from provision of MAT. However, no exemption is available in case where section 115BA has been opted.

5. Foreign Company

Assessment Year 2025-26 and 2026-27

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(a)  Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 2% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 5% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:

(i)  Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

(ii)  Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.

(b)  Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

Minimum Alternate Tax (MAT)

A foreign company is liable to pay Minimum Alternate Tax where tax payable by it, on total income computed as per normal provisions of the Act, is less than 15% of ‘book profit’. In such a case the ‘book profit’ is taken as the income of the company and it shall be liable to pay tax at the rate of 15% of such ‘book profit’.

However, the provisions of MAT do not apply in case of foreign companies if it does not have permanent establishment (PE) in India or opts for presumptive taxation scheme of Section 44B, Section 44BB, Section 44BBA or Section 44BBB.

6. Co-operative Society

Assessment Years 2025-26 and 2026-27

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(a) (a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:

(i) Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

(ii) Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.

(b) Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

Note:

(a) A co-op. society is liable to pay Alternate Minimum Tax where tax payable by it, on total income computed as per normal provisions of the Act, is less than 15% of ‘adjusted total income’. In such a case the ‘adjusted total income’ is taken as the income of co-op. society and it shall be liable to pay tax at the rate of 15% of such ‘adjusted total income’.

(b) If the assessee is a unit located in an International Financial Services Centre and derives its income solely in convertible foreign exchange, the rate of AMT will be 9%.

6.1. Alternative Tax regime for Co-operative societies

Income-tax Act allows a co-operative society to choose from the following alternative taxation regime subject to fulfilment of prescribed conditions:

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(a) Surcharge: The surcharge is levied at a rate of 10% on the amount of income-tax irrespective of the total income of such co-operative society.

(b) Health & Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4% of such income-tax and surcharge.

Note:

(a) If a co-operative society has exercised the option of Section 115BAD or Section 115BAE, the provisions of AMT shall not be applicable. Further, the provisions regarding computation and carry forward of AMT credit shall also be not applicable.

[As amended by Finance Act, 2025]

(Republished with amendments)