Taxation · Income Tax Liability - Computation and Optimisation

Tax Rates, Slab Rates and Rebate for Individuals

Updated 4 October 2026 · Fact-checked

Tax rates for individuals depend on the regime. The default regime has slabs from nil up to 30% above ₹24,00,000, and a rebate that makes income up to ₹12,00,000 tax-free for residents. Compute tax on slabs, deduct rebate, add surcharge with marginal relief, then add 4% cess. The alternative regime uses older slabs.

Understand Tax Rates, Slab Rates and Rebate for Individuals

Once you have total income, the last step is to apply the rate. For an individual, the rate depends on the regime. Under the Income-tax Act, 2025, the default regime applies unless you choose the alternative regime. The default regime has lower slab rates but allows very few deductions and exemptions. The alternative regime has higher slab rates but keeps the older exemptions and deductions.

Tax is worked out in layers. First, tax on total income at slab rates (and special rates for items like capital gains). Second, rebate for low-income residents. Third, surcharge for high incomes. Fourth, health and education cess at 4% on tax plus surcharge. Do these in this order every time.

Rebate is only for a resident individual. In the default regime, it applies if total income does not exceed ₹12,00,000, and it equals the tax, up to ₹60,000. In the alternative regime, it applies if total income does not exceed ₹5,00,000, and it is capped at ₹12,500. In the default regime, it is not given against tax on special-rate income such as capital gains.

Marginal relief stops a sudden jump in tax when income crosses a limit by a small amount. For rebate (default regime), tax is limited to the income above ₹12,00,000. For surcharge, tax plus surcharge on income above a threshold must not exceed the tax on the threshold income plus the extra income. Think of it as: you should never pay more extra tax than the extra income you earned.

The figures in this page are for tax year 2026-27 as per the Income-tax Act, 2025 as amended by the Finance Act, 2026. Age for the alternative regime is counted in the relevant tax year, and the senior citizen limits apply only to resident individuals aged 60 or more (and 80 or more for super senior).

Key rules to remember

Default regime slab rates (individual, HUF-type slabs for all ages): Up to ₹4,00,000: nil | ₹4,00,001 to ₹8,00,000: 5% | ₹8,00,001 to ₹12,00,000: 10% | ₹12,00,001 to ₹16,00,000: 15% | ₹16,00,001 to ₹20,00,000: 20% | ₹20,00,001 to ₹24,00,000: 25% | Above ₹24,00,000: 30%; Same slabs for every age. Cumulative tax at the end of each slab: ₹4L nil, ₹8L ₹20,000, ₹12L ₹60,000, ₹16L ₹1,20,000, ₹20L ₹2,00,000, ₹24L ₹3,00,000.
Alternative regime slab rates (below 60 years, resident or non-resident): Up to ₹2,50,000: nil | ₹2,50,001 to ₹5,00,000: 5% | ₹5,00,001 to ₹10,00,000: 20% | Above ₹10,00,000: 30%; Cumulative tax: ₹5L ₹12,500; ₹10L ₹1,12,500.
Alternative regime: senior and super senior citizens: Resident aged 60 to below 80: nil up to ₹3,00,000. Resident aged 80 or more: nil up to ₹5,00,000. Remaining slabs: 5% / 20% / 30% as above, starting from the higher exemption limit; Senior: 5% on ₹3L to ₹5L, 20% on ₹5L to ₹10L, 30% above. Super senior: 20% on ₹5L to ₹10L, 30% above. Not available in the default regime, which has one slab table.
Rebate for resident individuals: Default regime: if total income ≤ ₹12,00,000, rebate = tax, maximum ₹60,000. Alternative regime: if total income ≤ ₹5,00,000, rebate = tax, maximum ₹12,500; Only residents. In the default regime, not available against tax on special-rate income such as capital gains.
Marginal relief on rebate (default regime): If total income > ₹12,00,000: tax payable (before surcharge and cess) = lower of (tax on slabs) and (total income − ₹12,00,000); Works only where the excess income is less than the tax on slabs. For income beyond about ₹12,75,000 the slab tax is already lower than the excess.
Surcharge rates on income-tax (individual): Total income 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: 25% in default regime, 37% in alternative regime; Surcharge on tax on dividend income and on capital gains taxed at special rates (such as short-term gains on listed shares and long-term gains) is capped at 15%.
Marginal relief on surcharge: Tax + surcharge on income ≤ Tax on threshold income + (Total income − Threshold income); Thresholds: ₹50 lakh, ₹1 crore, ₹2 crore, ₹5 crore. Apply it before adding cess.
Health and education cess: Cess = 4% × (Tax after rebate and marginal relief + Surcharge); Cess is charged after surcharge. No marginal relief is needed for cess.

How to solve Tax Rates, Slab Rates and Rebate for Individuals questions

Use this order for any question asking for tax liability of an individual. Check the regime and residency first, because they change the slabs and the rebate.

1Note the regime (default unless the question says the person opts for the alternative regime), residential status and age.
2Take total income as already computed. Split it into normal income (taxed at slabs) and special-rate income (such as capital gains), if any.
3Compute tax on normal income using the slab table for that regime and age. Then add tax on special-rate income at its own rate.
4Apply rebate if the person is resident and total income is within the limit. For the default regime, if income exceeds ₹12,00,000 by a small amount, apply marginal relief on rebate.
5Check the surcharge threshold. If total income exceeds ₹50 lakh, compute surcharge at the right rate (with the 15% cap on dividend and certain capital gains) and then apply marginal relief if needed.
6Add 4% cess on tax plus surcharge.
7Round off the final tax to the nearest ₹10 as per the rounding rule, if the question asks for the final tax payable.
8If asked which regime is better, compute total tax under both regimes and compare, using the deductions allowed in each.

Quickest way: Cumulative slab table and threshold check

When to use it: Use for both MCQs and long answers on tax computation when income is given directly.

Memorise cumulative tax for the default regime: ₹8L gives ₹20,000, ₹12L gives ₹60,000, ₹16L gives ₹1,20,000, ₹20L gives ₹2,00,000, ₹24L gives ₹3,00,000. Then tax = cumulative at the lower limit + rate × the excess.
In MCQs, first check the shortcuts: resident with default-regime total income ≤ ₹12 lakh means tax is nil (apart from special-rate income). Total income ≤ ₹50 lakh means no surcharge. Then you can skip most working.
If income is just above ₹12 lakh, tax before cess is the excess over ₹12 lakh. Multiply by 1.04 for the final answer.
For surcharge marginal relief, compute the capped figure: tax on threshold + excess income. If it is lower than tax plus surcharge, use it.
In written answers, show a small table: slab, income in slab, rate, tax. Then show rebate or relief, surcharge, cess and final tax on separate lines. Each line earns a step mark.

Common mistakes in Tax Rates, Slab Rates and Rebate for Individuals

Applying rebate to a non-resident individual or to income above the limit without marginal relief.
Students remember the ₹12 lakh number but forget the conditions of residence and total income.
Fix: Check residency first. Then compare total income with ₹12,00,000 (default) or ₹5,00,000 (alternative). If just above the limit in the default regime, use marginal relief.
Adding cess before surcharge, or charging surcharge on cess.
Students treat all three as add-ons in any order.
Fix: Order is tax, less rebate and relief, plus surcharge, then cess at 4% on the total of these.
Charging surcharge on the whole total income instead of on the tax.
The threshold is stated in terms of income, so students apply the rate to income.
Fix: The threshold uses total income, but surcharge is a percentage of income-tax.
Using the alternative regime slab table or deductions when the question gives no choice.
Students are used to the older regime from earlier study.
Fix: Default regime applies unless the question says the person chooses the alternative regime. In the default regime, do not claim the deductions that are not allowed.
Applying the 37% surcharge to income above ₹5 crore in the default regime, or forgetting the 15% cap on dividend and capital gains.
Students memorise one surcharge table for both regimes.
Fix: Above ₹5 crore, 25% for the default regime and 37% for the alternative regime. Cap the surcharge at 15% on tax relating to dividend and the specified capital gains.
Giving marginal relief as the whole excess income instead of comparing it with tax.
Students memorise 'tax = excess income' without the condition.
Fix: Compute tax on slabs and the excess over the limit. Pay the lower. Relief applies only when the excess is smaller than the slab tax.

Worked examples

Example 1

Mr. Arun, a resident individual aged 35, has salary income of ₹13,00,000 for tax year 2026-27. He is under the default regime, and the standard deduction of ₹75,000 is allowed. He has no other income. Compute his tax liability.

Show the solution

Total income = ₹13,00,000 − ₹75,000 = ₹12,25,000.
Tax on slabs: ₹4,00,001 to ₹8,00,000 at 5% = ₹20,000. ₹8,00,001 to ₹12,00,000 at 10% = ₹40,000. ₹12,00,001 to ₹12,25,000: ₹25,000 at 15% = ₹3,750. Total = ₹63,750.
Total income exceeds ₹12,00,000, so full rebate is not available. Apply marginal relief: excess over ₹12,00,000 = ₹25,000.
Tax payable = lower of ₹63,750 and ₹25,000 = ₹25,000. Marginal relief = ₹38,750.
No surcharge, since income is below ₹50 lakh.
Cess = 4% × ₹25,000 = ₹1,000.
Total tax liability = ₹25,000 + ₹1,000 = ₹26,000.

Answer: Tax liability = ₹26,000.

Example 2

Ms. Rekha, a resident individual, has total income of ₹50,50,000, all taxable at normal slab rates, for tax year 2026-27 under the default regime. Compute her tax liability after marginal relief on surcharge.

Show the solution

Tax on first ₹24,00,000 = ₹3,00,000 (₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 + ₹1,00,000).
Income above ₹24,00,000 = ₹26,50,000 at 30% = ₹7,95,000. Tax on ₹50,50,000 = ₹10,95,000. Rebate is not available.
Total income exceeds ₹50 lakh, so surcharge at 10% = ₹1,09,500. Tax plus surcharge = ₹12,04,500.
Tax on ₹50,00,000: ₹3,00,000 + 30% × ₹26,00,000 = ₹3,00,000 + ₹7,80,000 = ₹10,80,000.
Excess income over ₹50,00,000 = ₹50,000. Maximum tax plus surcharge = ₹10,80,000 + ₹50,000 = ₹11,30,000.
₹12,04,500 exceeds ₹11,30,000, so marginal relief = ₹74,500. Tax plus surcharge after relief = ₹11,30,000 (surcharge effectively ₹35,000).
Cess = 4% × ₹11,30,000 = ₹45,200.
Total tax liability = ₹11,30,000 + ₹45,200 = ₹11,75,200.

Answer: Tax liability = ₹11,75,200.

Exam tips

Always state the regime and residency in the first line of your answer. Examiners award a mark for this, and it fixes the slab table and rebate.
In MCQs, test the shortcuts first: resident with total income up to ₹12 lakh in the default regime (nil tax apart from special-rate income) and income below ₹50 lakh (no surcharge). Many MCQs end there.
Show surcharge marginal relief as a three-line comparison: tax plus surcharge, capped figure, lower amount. This earns step marks even if you slip on arithmetic.
Do not forget the cap on surcharge for dividend and capital gains, and the lower top surcharge in the default regime. These are favourite traps.
Treat all rates as for tax year 2026-27. If a question gives different rates or limits, use the ones given in the question.

Practice questions from Income Tax Liability - Computation and Optimisation

Tax Rates, Slab Rates and Rebate for Individuals in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Tax Rates, Slab Rates and Rebate for Individuals: frequently asked questions

What is the difference between the default and alternative tax regime in CA Intermediate?

The default regime has lower slab rates, a higher rebate limit and a cap of 25% on surcharge, but allows very few deductions and exemptions. The alternative regime has higher slab rates and keeps the older exemptions and deductions. A person must choose the alternative regime; otherwise the default regime applies.

Is income up to ₹12 lakh always tax-free in the default regime?

No. It is tax-free only for a resident individual whose total income does not exceed ₹12,00,000, and the rebate is limited to ₹60,000. Tax on special-rate income such as capital gains does not get the rebate. A non-resident gets no rebate.

How do I calculate marginal relief on surcharge?

Compute tax plus surcharge on your total income. Then compute tax on the threshold income plus the income above the threshold. Pay the lower of the two, then add 4% cess. Marginal relief is the difference.

Is cess charged before or after surcharge?

After. Health and education cess is 4% on the sum of income-tax (after rebate and relief) and surcharge. There is no marginal relief for cess.