Tax SlabsSurcharge, cess and rebate: the three additions to the slabs
The slab rates give the basic income tax. Three more steps turn that into the amount actually payable: the rebate takes tax off at lower incomes, the surcharge adds to it at high incomes, and the cess is added for everyone. This page gives each for tax year 2026-27.
The order of working
- Work out the tax on the taxable income from the slabs.
- Subtract the rebate, if the income is within the rebate limit.
- Add the surcharge, if the income is above ₹50 lakh.
- Add 4% health and education cess on the total.
Rebate
| Regime | Taxable income not above | Rebate up to |
|---|---|---|
| New regime | ₹12,00,000 | ₹60,000 |
| Old regime | ₹5,00,000 | ₹12,500 |
The rebate is for resident individuals. It is why "no tax up to ₹12 lakh" is true in the new regime even though the slabs start charging tax above ₹4 lakh: the tax on ₹12 lakh is exactly ₹60,000, and the rebate removes it. In the new regime the rebate does not apply to income taxed at special rates, such as capital gains.
Surcharge
Surcharge is a percentage of the income tax, not of the income.
New regime
| Total income | Surcharge |
|---|---|
| Above ₹50 lakh up to ₹1 crore | 10% |
| Above ₹1 crore up to ₹2 crore | 15% |
| Above ₹2 crore | 25% |
Old regime
| Total income | Surcharge |
|---|---|
| Above ₹50 lakh up to ₹1 crore | 10% |
| Above ₹1 crore up to ₹2 crore | 15% |
| Above ₹2 crore up to ₹5 crore | 25% |
| Above ₹5 crore | 37% |
In the new regime the surcharge stops at 25%. On tax on dividends and on certain capital gains, the surcharge is not more than 15% in either regime.
Marginal relief on surcharge
A surcharge that starts the moment income crosses a line could cost more than the extra income. Marginal relief prevents that: the tax and surcharge together cannot be more than the tax at the limit plus the income above the limit. Example in the new regime, no standard deduction: on an income of ₹50,00,000 the tax is ₹10,80,000. On ₹51,00,000 the tax is ₹11,10,000 and a full 10% surcharge would make it ₹12,21,000, an increase larger than the extra ₹1 lakh. With marginal relief the tax and surcharge come to ₹11,80,000.
Cess
Health and education cess is 4% of the income tax plus surcharge. There is no marginal relief on cess. In the example above, the cess on ₹11,80,000 is ₹47,200, making the tax for the year ₹12,27,200.
Common questions
What is the health and education cess?
It is an extra 4% charged on the income tax (and on the surcharge, if any). Everyone who pays income tax pays it.
From what income does surcharge start?
Surcharge applies when the total income is above ₹50 lakh. It is 10% of the tax up to ₹1 crore and rises in steps.
What is the rebate under section 87A?
It is a reduction in tax for resident individuals with lower incomes: up to ₹60,000 in the new regime when taxable income is not above ₹12,00,000, and up to ₹12,500 in the old regime when it is not above ₹5,00,000. Under the Income-tax Act, 2025 the same rebate continues under a new section number.
Sources
- Slabs of both regimes, surcharge and cess for tax year 2026-27: Memorandum explaining the provisions of the Finance Bill, 2026, Ministry of Finance (February 2026), which states that no change is proposed in these rates.
- The same rates, the rebate limits and the deduction limits for financial year 2025-26: Income Tax Department, e-filing portal help page "Salaried Individuals for AY 2026-27".
- Checked on 11 November 2026.
Rates checked on 11 November 2026 against the Finance Bill, 2026 memorandum and the Income Tax Department's e-filing help pages. Tax law changes with every Budget and has many special cases. This page is general information and arithmetic, not tax advice: confirm your own position at incometax.gov.in or with a tax professional.