Tax Rates & Computation — Chapter XIII
INCOME TAX ACT 2025 · CHAPTER XIII · SECTIONS 195–206
Tax Rates & Computation
Complete reference for all income tax rates under the Income Tax Act 2025 — new regime slabs for individuals, old regime rates, capital gains rates (STCG 20%, LTCG 12.5%), special income rates, corporate tax rates, and surcharge & cess structure.
📘 Sections: 192–195 (special rates — PF, undisclosed income, royalty, online games) · 196 (STCG — STT-paid equity 20%) · 197 (LTCG — general 12.5%) · 198 (LTCG — equity/ETF ₹1.25L + 12.5%) · 199–201 (manufacturing company regimes) · 202 (new regime individuals/HUF) · 203–204 (co-operative society regimes) · 206 (MAT 15%)
📅 Effective: 1st April 2026 (Tax Year 2026-27 onwards)
📅 Effective: 1st April 2026 (Tax Year 2026-27 onwards)
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Section 202 — New Tax Regime (Default): Individuals, HUF, AOP, BOI
The new tax regime is the default from Tax Year 2026-27. Eligible persons: Individual, HUF, AOP (other than co-operative society), BOI, or artificial juridical person. To opt for the old regime, the assessee must exercise the option in the prescribed manner.
| Total Income Slab | Rate | Tax on Slab |
|---|---|---|
| Up to ₹4,00,000 | Nil | — |
| ₹4,00,001 to ₹8,00,000 | 5% | ₹20,000 |
| ₹8,00,001 to ₹12,00,000 | 10% | ₹40,000 |
| ₹12,00,001 to ₹16,00,000 | 15% | ₹60,000 |
| ₹16,00,001 to ₹20,00,000 | 20% | ₹80,000 |
| ₹20,00,001 to ₹24,00,000 | 25% | ₹1,00,000 |
| Above ₹24,00,000 | 30% | — |
Section 156 Rebate — Zero Tax up to ₹12L
Resident individuals with total income ≤ ₹12,00,000 pay zero tax under the new regime, due to the rebate under Section 156(2) of up to ₹60,000. For salaried individuals (with ₹75,000 standard deduction), effective zero-tax threshold is ₹12,75,000.
What is NOT available under New Regime [Sec 202(2)]
HRA, LTA (most exemptions), home loan interest on SOP, deductions under most of Chapter VIII (80C, 80D, 80DD, 80E etc.), additional depreciation (Section 33(8)), Sec 80-IE / 10AA investments, set-off of HP loss. Available: employer NPS (Sec 124(1)/(2)), Agniveer Govt contribution (Sec 125(2)), additional employee cost (Sec 146), standard deduction (Sec 19 Sl. 2).
Old Tax Regime (Optional): Individuals & HUF Slab Rates
The old regime is elected by exercising the option to opt out of Section 202 before the due date of filing the ITR. Under the old regime, all Chapter VIII deductions and most exemptions remain available.
| Total Income Slab | Rate | Senior Citizen (60–80) | Super Senior (80+) |
|---|---|---|---|
| Up to ₹2,50,000 | Nil | Nil (up to ₹3L) | Nil (up to ₹5L) |
| ₹2,50,001 to ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 to ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
Old regime rebate [Section 156(1)]: Resident individuals with total income ≤ ₹5,00,000 get a rebate of 100% of tax payable or ₹12,500, whichever is less — effectively zero tax. Standard deduction: ₹50,000.
New Regime vs Old Regime — Key Comparison
| Parameter | New Regime (Sec 202) | Old Regime |
|---|---|---|
| Default / Optional | Default | Optional (must opt out of Sec 202) |
| Zero tax threshold | ₹12,00,000 (₹12,75,000 for salaried) | ₹5,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| 80C deductions | Not available | Available (₹1.5L) |
| HRA exemption | Not available | Available |
| Home loan interest (SOP) | Not available | ₹2L deduction |
| NPS employer contribution | Available (Sec 124(1)/(2)) | Available |
| Advance tax instalments | 4 instalments (unless presumptive) | 4 instalments (unless presumptive) |
| HP loss set-off | Not allowed against other heads | Allowed up to ₹2L |
Capital Gains Tax Rates — Sections 196, 197, 198
| Sec | Type of Gain | Rate | Conditions |
|---|---|---|---|
| 196 | STCG on equity shares / equity ETF / business trust units — STT paid, on recognised exchange | 20% | Securities Transaction Tax must have been paid. Not applicable to IFSC exchange transactions in foreign currency. |
| 197 | LTCG — general (all long-term capital assets) including land, building, unlisted shares, debt mutual funds | 12.5% | No indexation from AY 2026-27. Special grandfathering: For land/building acquired before 23 July 2024 — choose lower of (a) 12.5% without indexation or (b) 20% with indexation [Section 197(3)] |
| 198 | LTCG on listed equity / equity ETF / business trust — STT paid | 12.5% | ₹1,25,000 annual exemption — LTCG on equity is exempt up to ₹1,25,000 per year. Tax at 12.5% only on the excess over ₹1,25,000. [Section 198(2)(a)] |
Marginal relief for residents with income below basic exemption [Sec 196(2) / 197(2)]:
If a resident individual's non-capital-gains income is below the basic exemption, the capital gains are reduced by the shortfall before applying the capital gains rate. This prevents residents with low total income from paying more capital gains tax than necessary.
Special Rates on Specific Income — Sections 192–195
| Sec | Who | Income Type | Rate | Notes |
|---|---|---|---|---|
| 192 | Any person | Undisclosed income (unexplained cash credits, investments, expenditure etc. — Sections 102–106) | 60% | No deduction/set-off allowed against this income. Plus surcharge 25% + cess 4% = effective ~78.36% |
| 193 | Individual employee | PF withdrawal where accumulated balance from employer + interest is included in salary | Avg rate | Special averaging provision for recognised PF withdrawals |
| 194 | Any person | Various special incomes (horse races 30%, royalty income 10%, carbon credits 30%, winnings online 30%, lotteries 30%, life insurance business 12.5%) | 10–30% | See Section 194 table for specific rates by income type |
| 195 | Any assessee | Income from undisclosed sources declared in return or assessed by AO (Sections 102–106) | 60% + balance tax | Aggregate of 60% on undisclosed income PLUS normal tax on remaining income |
Section 194 — Key Special Rates Quick Reference:
Winnings — Lottery / Crossword / Card game: 30%
Online game net winnings: 30%
Horse race winnings: 30%
Carbon credits: 30%
Royalty on patents (resident): 10%
Life insurance business profits: 12.5%
Corporate Tax Rates — Sections 199–201
| Sec | Category | Rate | Key Conditions |
|---|---|---|---|
| — | Domestic company — standard rate (no special election) | 30% | Default rate; all deductions available |
| 200 | Existing domestic company — optional concessional regime | 22% | Option irrevocable; no Chapter VIII (except Sec 146/148) deductions; no profit-linked deductions |
| 199 | New manufacturing company (set up ≥ 1 Mar 2016, no other business) | 25% | Must be set up after 1 March 2016 and engaged only in manufacturing/production + related R&D/distribution |
| 201 | New manufacturing company (set up ≥ 1 Oct 2019, commenced production by 31 Mar 2024) | 15% | Lowest corporate rate; eligible only for new post-Oct 2019 manufacturers; production commenced by 31 Mar 2024. Non-manufacturing income at 22%; STCG on non-depreciable assets at 22%; Sec 115BBD income at 30%. |
Foreign companies: Standard rate is 40%. Royalty / FTS from India: 10% (if under DTAA or prescribed). Dividend: 20%.
Surcharge & Health and Education Cess
Surcharge — Individuals (Both Regimes)
| Total Income | Surcharge Rate |
|---|---|
| Up to ₹50,00,000 | Nil |
| ₹50,00,001 to ₹1 crore | 10% |
| ₹1 crore to ₹2 crore | 15% |
| ₹2 crore to ₹5 crore | 25% |
| Above ₹5 crore | 25% (reduced from 37% for new regime; old regime retains 37% above ₹5Cr) |
Surcharge cap on capital gains: Surcharge on STCG (Sec 196) and LTCG (Secs 197/198) is capped at 15% regardless of total income. So even if total income exceeds ₹5 crore, surcharge on equity capital gains is only 15%.
Domestic companies: 7% surcharge if total income is ₹1–10 crore; 12% if above ₹10 crore.
Cess: 4% Health and Education Cess on (tax + surcharge) — applicable to all assessees.
Domestic companies: 7% surcharge if total income is ₹1–10 crore; 12% if above ₹10 crore.
Cess: 4% Health and Education Cess on (tax + surcharge) — applicable to all assessees.
Minimum Alternate Tax (MAT) — Section 206
Where a company's normal income tax liability is less than 15% of book profit, the company pays MAT at 15% of book profit.
- Rate: 15% of book profit (+ surcharge + cess)
- Book profit = net profit as per P&L account, adjusted upward for various additions (deductions claimed, depreciation, certain provisions) and downward for certain items
- MAT credit: Excess of MAT over normal tax is carried forward as MAT credit — can be set off against normal tax in future years when normal tax exceeds MAT
- MAT credit carry forward: For up to 15 years
- Not applicable to: Companies opting for Section 199 (25%), 200 (22%), or 201 (15%) special regimes
Practical Q&A
| Question | Answer |
|---|---|
| Total income ₹15L under new regime (salaried, no other income). What is the tax? | After ₹75K standard deduction, taxable = ₹14,25,000. Tax: Nil on ₹4L + 5% on ₹4L (₹20K) + 10% on ₹4L (₹40K) + 15% on ₹2.25L (₹33,750) = ₹93,750. No rebate (income > ₹12L). Add 4% cess = ₹97,500 total. |
| LTCG from selling listed equity shares: ₹3 lakh. Tax payable? | Exempt up to ₹1,25,000. Taxable LTCG = ₹1,75,000. Tax = 12.5% × ₹1,75,000 = ₹21,875. Add 4% cess = ₹22,750. (No surcharge if total income < ₹50L.) |
| My total income is ₹12,50,000 under the new regime. What tax do I pay? | Tax on ₹12.5L = ₹60,000 (normal computation). Excess over ₹12L = ₹50,000. Since tax (₹60K) > excess (₹50K), marginal relief applies → tax = ₹50,000 + 4% cess = ₹52,000. |
| Can a newly incorporated manufacturing company (Oct 2020) getting a tax audit still avail 15% tax rate? | Yes — Section 201 (15%) is available if: incorporated after 1 Oct 2019, engaged only in manufacturing, commenced production by 31 Mar 2024, and exercised the option by ITR due date of first year. Tax audit compliance is independent of this regime election. |
| STCG from STT-paid equity mutual fund = ₹5L. Total income ₹80L. What's the effective tax? | STCG tax = 20% × ₹5L = ₹1L. Surcharge on STCG capped at 15% → 15% × ₹1L = ₹15,000. Cess 4% on ₹1,15,000 = ₹4,600. Total on STCG = ₹1,19,600. |
| Undisclosed cash credit of ₹20L detected in search. What's the tax? | Tax @ 60% = ₹12L. Plus surcharge 25% on ₹12L = ₹3L. Plus cess 4% on ₹15L = ₹60,000. Total = ₹15,60,000. Additionally, penalty under Section 435 may be 10–300% of undisclosed income. No set-off of losses allowed. |
📖 Related Topics
📌 Source: Income Tax Act 2025, Act No. 30 of 2025 — Section 192–195 (pages 231–236), Section 196 (page 237), Section 197 (page 238), Section 198 (page 239), Sections 199–201 (pages 240–242), Section 202 (page 243), Sections 203–204 (pages 244–245), Section 206 (pages 248–251), as published in the Gazette of India Extraordinary dated 21st August 2025.