Tax Year 2026-27 Meaning: Which Financial Year and What Changed

Tax Year 2026-27 means the financial year from 1 April 2026 to 31 March 2027. It is the same twelve months you would have called FY 2026-27. The new name comes from the Income-tax Act, 2025, which replaced the Income-tax Act, 1961 on 1 April 2026 and uses one term, "tax year", in place of the old pair "previous year" and "assessment year". Income you earn in this period is taxed under the new Act, and you file its return in 2027.

Your income for FY 2025-26 (the year that ended on 31 March 2026, called AY 2026-27 under the old law) is still taxed under the 1961 Act. For a salaried person the tax itself has not changed: the slabs, the rebate and the standard deduction are the same as last year, so the income tax calculator gives the same answer for both years. What changed is the vocabulary, the section numbers, a few form names, and one rule that matters to many renters: the HRA list of 50% cities.

What "tax year" means in the Income-tax Act, 2025

Section 3 of the new Act defines a tax year as "the twelve months period of the financial year commencing on the 1st April". So Tax Year 2026-27 runs from 1 April 2026 to 31 March 2027, Tax Year 2027-28 from 1 April 2027 to 31 March 2028, and so on.

There is one exception. If a business or profession is set up, or a new source of income starts, partway through a financial year, its first tax year begins on that date and ends on 31 March. A shop that opens on 15 September 2026 has a first tax year of 15 September 2026 to 31 March 2027.

Under the 1961 Act you had to juggle two labels. Income was earned in the "previous year" and assessed in the following "assessment year", which is why a return was described as "FY 2025-26, AY 2026-27". The new Act drops the assessment year completely. The year you earn the income and the year you talk about on the return now have the same name.

Old labels and new labels side by side

The table below is the quickest way to stop mixing up the years. Read across each row: it is one twelve-month period described both ways.

The trap is the number "2026-27". AY 2026-27 and Tax Year 2026-27 are different years. AY 2026-27 is the old-law name for the return of income earned in FY 2025-26. Tax Year 2026-27 is the income you are earning right now, from April 2026. If your bank, HR portal or a tax article says "AY 2026-27", it is talking about last year's income.

Which income is still under the 1961 Act

Everything you earned up to 31 March 2026 stays with the old law. The repeal section of the new Act (section 536) says the 1961 Act continues to apply to notices, assessments, rectifications, penalties and appeals for any year that began before 1 April 2026, and that refunds for those years are handled under it too.

In practice that means:

• The return for FY 2025-26 (AY 2026-27), filed in 2026, uses the 1961 Act and its familiar section numbers such as 80C and 87A.
• Your employer issues the old Form 16 for salary paid up to March 2026.
• If you missed that return, a belated return for FY 2025-26 is still filed under the old law, with a late fee.
• Any notice about FY 2025-26 or an earlier year is dealt with under the 1961 Act, even if it arrives in 2027.

Choices you made under the old law also carry over. The repeal section treats an option exercised under the 1961 Act as made under the matching provision of the new Act, which matters mainly to people with business income who opted out of the new regime earlier.

What did not change

When the new Act came into force, the Ministry of Finance described it as a simpler rewrite "without altering the underlying tax policy". The Finance Act, 2026 also left the personal tax rates alone. For a salaried person, these are exactly the same in Tax Year 2026-27 as in FY 2025-26:

• New regime slabs: nil up to ₹4 lakh, then 5%, 10%, 15%, 20% and 25% in steps of ₹4 lakh, and 30% above ₹24 lakh.
• Rebate (old section 87A, now section 156): up to ₹60,000 in the new regime when taxable income is ₹12 lakh or less, with marginal relief just above it. In the old regime it is still up to ₹12,500 for taxable income up to ₹5 lakh.
• Standard deduction: ₹75,000 in the new regime and ₹50,000 in the old regime.
• Old regime slabs and deduction limits: 80C up to ₹1.5 lakh, 80D up to ₹25,000 for your family, home-loan interest on a self-occupied house up to ₹2 lakh.
• Cess and surcharge: 4% health and education cess; surcharge from ₹50 lakh, capped at 25% in the new regime.

Worked example: the same salary in both years

Take a gross salary of ₹15 lakh in the new regime, with no other income.

1. Subtract the standard deduction: ₹15,00,000 − ₹75,000 = taxable income of ₹14,25,000.
2. Tax on slabs: ₹20,000 (4–8 lakh at 5%) + ₹40,000 (8–12 lakh at 10%) + ₹33,750 (12–14.25 lakh at 15%) = ₹93,750.
3. No rebate, because taxable income is above ₹12 lakh and the tax is well under the marginal-relief limit.
4. Add 4% cess of ₹3,750. Total tax: ₹97,500.

The figure is identical for FY 2025-26 under the 1961 Act and for Tax Year 2026-27 under the 2025 Act. A full slab-by-slab table for other salaries is in our guide to the new tax regime slabs for 2026-27.

The change renters will notice: HRA in eight cities

The new Income-tax Rules, 2026 (Rule 279) widened the list of cities where the HRA exemption uses 50% of salary instead of 40%. From Tax Year 2026-27 the 50% list is Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. For FY 2025-26 only the first four qualified.

Example: you live in Bengaluru with a basic salary of ₹60,000 a month, HRA of ₹30,000 a month and rent of ₹35,000 a month. Using the HRA calculator:

• FY 2025-26 (40% rule): exempt HRA ₹2,88,000, because 40% of basic was the smallest of the three limits.
• Tax Year 2026-27 (50% rule): exempt HRA ₹3,48,000, now limited by rent minus 10% of basic.

That is ₹60,000 more tax-free HRA. If your gross salary is ₹18 lakh and you also claim ₹1.5 lakh under 80C, ₹25,000 under 80D and ₹2,500 of professional tax, old-regime tax falls from ₹2,05,764 to ₹1,87,044, a saving of ₹18,720. The catch: the new regime on the same ₹18 lakh is ₹1,50,800, still lower, because HRA is not exempt in the new regime at all. Our HRA exemption guide for 2026-27 works through more cases.

Old section numbers and their new homes

You will keep hearing "80C" and "87A" for years, and that is fine. If you read a notice, a payslip note or the Act itself, this map helps.

Two salary forms also have new numbers. The Income Tax Department now lists Form 130 as the salary TDS certificate that replaces Form 16, and Form 124 as the employee's statement of claims that replaces Form 12BB. Form 130 applies from Tax Year 2026-27, so you will first receive one in 2027.

What it means for you as a salaried employee

Choosing a regime

The new regime is still the default. Early in the year your employer asks which regime you want for monthly TDS; if you say nothing, it deducts tax under the new regime. That choice is not final. Under section 202 of the new Act, a person without business or professional income makes the actual choice in the return, every year. Someone with business income has to opt out by the return due date, the choice continues in later years, and it can be withdrawn only once. Our old vs new regime break-even guide shows how much in deductions you need before the old regime wins.

Investment proofs

If you pick the old regime with your employer, you give proof of rent, insurance, PPF, ELSS and home-loan interest on Form 124 (earlier Form 12BB). Rule 205 asks for the landlord's name, address and PAN when the rent in the tax year is more than ₹1 lakh, and your relationship with the landlord, if any. If you stay in the new regime, most of these proofs do not matter, except the employer's NPS contribution, which is handled through payroll.

Filing

The return for Tax Year 2026-27 is filed in 2027. For most salaried people the Act's due date is 31 July 2027. Until then you may see both vocabularies at once: an ITR form for "AY 2026-27" for last year's income and a payslip that says "Tax Year 2026-27" for this year's. To see what your take-home looks like after TDS, try the in-hand salary calculator.

This article is general information about the Income-tax Act, 2025, not tax advice for your situation.

Frequently asked questions

Is Tax Year 2026-27 the same as AY 2026-27?

No. AY 2026-27 is the old name for the return of income earned from April 2025 to March 2026. Tax Year 2026-27 is income earned from April 2026 to March 2027. They are one year apart.

Is FY 2026-27 the same as Tax Year 2026-27?

Yes, for nearly everyone. Both cover 1 April 2026 to 31 March 2027. The only difference is for a business or income source that starts mid-year, whose first tax year begins on its start date.

Has the income tax slab changed for Tax Year 2026-27?

No. The new regime slabs, the ₹75,000 standard deduction and the rebate that makes taxable income up to ₹12 lakh tax-free are the same as in FY 2025-26. Only the section numbers moved.

Which law applies to the return I file in 2026?

The Income-tax Act, 1961. A return filed in 2026 covers income of FY 2025-26, so it uses the old law, old section numbers and Form 16.

What is Form 130?

It is the new number for the salary TDS certificate, earlier called Form 16. Your employer will issue it for Tax Year 2026-27 onwards. The certificate for salary up to March 2026 is still Form 16.

Can I still claim 80C?

Yes, in the old regime. The same ₹1.5 lakh deduction now sits in section 123 and Schedule XV of the new Act. It is not available in the new regime.

Sources: Income-tax Act, 2025 (sections 3, 19, 124, 134, 156, 202, 263 and 536; Schedule III); Income-tax Rules, 2026 (Rules 205 and 279); Press Information Bureau release, 1 April 2026; Income Tax Department guidance on Forms 124 and 130; Income Tax e-filing portal. Rules as of October 2026.