The new tax regime is no longer Section 115BAC. From April 1, 2026, the same concessional slab structure sits in Section 202 of the Income-tax Act, 2025, a law that replaced the six-decade-old Income-tax Act, 1961.
For most salaried taxpayers, the practical effect is close to zero: the slabs, the ₹75,000 standard deduction and the rebate that makes normal income up to ₹12 lakh tax-free have all carried over.
What has changed is the legal address, the terminology and the procedure for leaving the default regime.
Section 202 applies to individuals, Hindu undivided families, associations of persons other than co-operative societies, bodies of individuals and artificial juridical persons.
It remains the default regime, which means a taxpayer who wants the older regime and its deductions must actively opt out.
The income-tax payable is computed at the rates in the table under Section 202(1): nil up to ₹4 lakh, 5% from ₹4,00,001 to ₹8,00,000, 10% from ₹8,00,001 to ₹12,00,000, 15% from ₹12,00,001 to ₹16,00,000, 20% from ₹16,00,001 to ₹20,00,000, 25% from ₹20,00,001 to ₹24,00,000 and 30% above ₹24,00,000.
The rebate is now under Section 156 of the 2025 Act, previously Section 87A of the 1961 Act. It can be up to ₹60,000 on qualifying income up to ₹12 lakh, and the Income Tax Department’s guidance states that eligible salaried individuals earning up to ₹12.75 lakh may have no income tax liability after the standard deduction, subject to conditions. The rebate does not eliminate tax on income taxable at special rates, including certain capital gains.
The change in vocabulary is the one taxpayers will notice first.
The 2025 Act replaces “Previous Year” and “Assessment Year” with a single “Tax Year”, defined as the 12 months beginning April 1.
Anita Basrur, partner at Sudit K Parekh & Co LLP, said the old two-step timeline had been confusing for the general public: “Income earned in FY 2024-25 became income of Assessment Year 2025-26. To simplify the understanding, the concept of Tax Year has been introduced”.
The practical consequence is that income earned in a tax year will be reported and assessed in that same year, rather than in a following assessment year.
For taxpayers with business or professional income, the opt-out mechanism has also moved. The exercise or withdrawal of the option to leave the default regime is now governed by Rule 136 of the Income-tax Rules, 2026, which replaces Rule 21AD of the 1962 rules.
Individuals without business income can generally choose between the regimes every year, while those with business or professional income face restrictions on subsequent switches.
The Income Tax Department of India also states that alternate minimum tax provisions do not apply to a taxpayer in the new regime, a point relevant to those with presumptive business income who might otherwise compute tax twice.
Income earned in FY 2025-26 will still be assessed under the Income-tax Act, 1961, including Section 115BAC. The 2025 Act governs income from FY 2026-27 onward, referred to as Tax Year 2026-27.
The Income Tax Department has published an FAQ on the interplay and transition between the two laws for taxpayers who want the official version.
