From April 1, how much of your income will be tax-free under both old and new tax regimes?

As the new financial year starting April 1, 2026 approaches, you may be curious to know how much income will be fully tax-free under both the old and new tax regimes. This article aims to answer this question.

From April 1, the new Income-tax Act, 2025 and Income-tax Rules 2026 will come into effect. These will replace the Income-tax Act 1961 and the Income-tax Rules 1962. While the new laws have simplified the earlier rules and changed the numbering of several provisions across sections, there is no major overhaul in tax slabs, tax rates or the rebate.

As there is no change in tax rates or the rebate, the tax-free income threshold in FY 2026-27 will remain the same as in FY 2025-26. Higher allowances under the old regime will not make a difference to the tax-free income threshold, as they generally come into play only when an individual's income is already in the taxable range. That said, here's a look at how much income will actually be tax-free.

Let's start with the old tax regime

For individuals and senior citizens, the basic exemption limits are ₹2.5 lakh and ₹3 lakh, respectively. For super senior citizens, this limit is ₹5 lakh. This means a person with income up to these thresholds does not have to pay any tax.

Further, a person having income up to ₹5 lakh doesn't need to pay tax under the old tax regime. This is possible due to a rebate of ₹12,500 under Section 87A of the Income-tax Act, 1961.

Income above ₹5 lakh can also become tax-free in the old regime, depending on your ability to claim various deductions and exemptions. Some popular deductions available under the old regime include the following:

• ₹50,000 standard deduction for salaried taxpayers

• Up to ₹1.5 lakh under Section 80C

• Up to ₹2 lakh for housing loan interest

• Deduction for health insurance premium payment under Section 80D

• HRA

If your total income, after adjusting all the available deductions and exemptions for which you are eligible, remains up to ₹5 lakh, then you will not have to pay any tax under the old tax regime.

How much income is tax-free in the new regime

For all individuals, including senior and super senior citizens, there is a basic exemption limit of ₹4 lakh under the new tax regime. This means a person with income up to ₹4 does not have to pay any tax in this regime.

Since FY 2025-26, total income up to ₹12 lakh has become fully tax-free in the new regime due to a rebate of ₹60,000 under Section 87A. For salaried persons, the tax-free threshold rises to ₹12.75 lakh due to a standard deduction of ₹75,000. In this case, the taxable income remains at ₹12 lakh after reducing the standard deduction from the total.

However, you have to pay tax under the following two situations:

• If your taxable income is above ₹12 lakh

• If your total income is below ₹12 lakh, but it includes capital gains from sources for which special rates have been provided in the Income-tax law, such as gains from equity mutual funds and shares. In this case, the capital gains part will be taxed as it is not eligible for the Section 87A rebate, as clarified by the Income-tax Department after Budget 2026.

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