Updated Tax Rates Applicable to Individuals, HUFs, Firms, Companies and Co-operative Societies for FY 2025-26 & AY 2026-27

The Income-tax framework for Assessment Years 2025–26 and 2026–27 introduces updated slab rates, surcharge rules, cess applicability, and special concessional regimes for various categories of taxpayers. This consolidated guide provides a structured and up-to-date reference of the tax rates applicable to Individuals, HUFs, AOPs, BOIs, Firms, LLPs, Companies, Co-operative Societies, and Local Authorities. It also summarises key provisions relating to AMT, MAT, rebate under Section 87A, and concessional tax regimes under Sections 115BAC, 115BAA, 115BAB, 115BAD, and 115BAE.
The objective of this document is to offer a clear and reliable snapshot of the statutory tax structure as amended by the Finance Act, 2025.

Tax Rates

1. Individuals (Resident or Non-resident), HUFs, AOPs, BOIs, and Other Artificial Juridical Persons

a. Individuals (Other than Resident Senior or Super Senior Citizens)

b. Resident Senior Citizens

(60 years or more but less than 80 years during the previous year)

c. Resident Super Senior Citizens

(80 years or more during the previous year)

d. Hindu Undivided Family (Including AOPs, BOIs, and Other Artificial Juridical Persons)

Surcharge

Surcharge is levied on the amount of income tax at the following rates when the total income exceeds the specified thresholds:

Important Note:

1. The higher surcharge rates of 25% and 37% do not apply to:

   • Dividend income

   • Income taxable under Sections 111A, 112, 112A, and 115AD(1)(b)

2. For such incomes, the maximum surcharge is capped at 15%.

   (3) Surcharge Exemption for Specified Funds

   No surcharge is applicable if the total income of a ‘specified fund’ (as defined under Section 10(4D)) includes income from securities referred to in Section 115AD(1)(a).

   Marginal Relief – Conditions and Application

   Marginal relief is provided so that the increase in tax liability (including surcharge) is not disproportionately higher than the increase in income. It applies as follows:

   1. Income above ₹50 lakh and up to ₹1 crore:
      The tax plus surcharge should not exceed the tax payable on ₹50 lakh by more than the amount by which the income exceeds ₹50 lakh.

   2. Income above ₹1 crore and up to ₹2 crore:
      The combined tax and surcharge cannot be more than the tax payable on ₹1 crore plus the income exceeding ₹1 crore.

   3. Income above ₹2 crore and up to ₹5 crore:
      Total tax liability (tax + surcharge) shall not exceed the tax on ₹2 crore by more than the additional income above ₹2 crore.

   4. Income exceeding ₹5 crore:
      The tax plus surcharge should not go beyond the tax payable on ₹5 crore by more than the income exceeding ₹5 crore.

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   b. Health and Education Cess

   A cess of 4% is charged on the total of income-tax plus surcharge.

   Exceptions:

   1. No cess is levied on a specified fund (Section 10(4D)) if its income includes securities income covered under Section 115AD(1)(a).

   2. A resident individual with taxable income up to ₹5,00,000 is eligible for rebate under Section 87A, reducing their income-tax liability (before cess) by 100% of tax or ₹12,500, whichever is lower.

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   Alternate Minimum Tax (AMT)

   AMT applies when the regular tax payable is less than 18.5% of the adjusted total income. In such cases, tax is computed at 18.5% of adjusted total income.

   For non-corporate taxpayers who are units in an IFSC and earn solely in foreign exchange, AMT is charged at a reduced rate of 9% (plus applicable cess and surcharge).

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   1.1 Special Tax Rates for Individuals, HUFs, AOPs, BOIs, and AJPs

   Section 115BAC offers an optional lower tax rate regime (now the default regime). To opt for this structure, the taxpayer must forego various deductions and exemptions.

   Tax Slabs – Assessment Year 2025–26

   Net Income	Tax Rate
   Up to ₹3,00,000	Nil
   ₹3,00,001 – ₹7,00,000	5%
   ₹7,00,001 – ₹10,00,000	10%
   ₹10,00,001 – ₹12,00,000	15%
   ₹12,00,001 – ₹15,00,000	20%
   Above ₹15,00,000	30%

   Tax Slabs – Assessment Year 2026–27

   Net Income	Tax Rate
   Up to ₹4,00,000	Nil
   ₹4,00,001 – ₹8,00,000	5%
   ₹8,00,001 – ₹12,00,000	10%
   ₹12,00,001 – ₹16,00,000	15%
   ₹16,00,001 – ₹20,00,000	20%
   ₹20,00,001 – ₹24,00,000	25%
   Above ₹24,00,000	30%

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   Additional Tax Components

   a. Surcharge

   Surcharge is imposed on income-tax based on the total income:

   Income Range	Surcharge Rate
   ₹50 lakh – ₹1 crore	10%
   ₹1 crore – ₹2 crore	15%
   ₹2 crore – ₹5 crore	25%
   Above ₹5 crore	37%

   Notes:

   • The 25% surcharge is not applicable to dividend income or incomes taxed under Sections 111A, 112, 112A, and 115AD(1)(b). For such incomes, the surcharge cannot exceed 15%.

   • If an AOP has only corporate members, surcharge is capped at 15%.

   • Specified funds under Section 10(4D) with eligible securities income have no surcharge.

   Marginal Relief under New Regime

   Provided similarly as in the old regime:

   • Ensures tax + surcharge does not exceed tax on the threshold (₹50 lakh / ₹1 crore / ₹2 crore) by more than the excess income above that threshold.

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   Health & Education Cess (New Regime)

   A cess of 4% is charged on tax plus surcharge, except when the taxpayer is a specified fund covered under Section 115AD(1)(a).

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   Important Notes

   (a) Rebate under Section 87A

   • Up to AY 2025–26:
     Residents opting for Section 115BAC(1A) and having income up to ₹7,00,000 get a rebate up to ₹25,000.

   • From AY 2026–27:
     Rebate increased to ₹60,000 for residents with income up to ₹12,00,000 under Section 115BAC(1A).
     Rebate cannot exceed the actual tax computed.

   (b) Marginal Rebate (AY 2026–27 onwards)

   If income slightly exceeds ₹7 lakh or ₹12 lakh (as applicable), rebate is adjusted (marginal relief) so that:

   • The tax payable does not exceed the amount by which income exceeds the threshold.

   (c) AMT Exemption under New Regime

   Taxpayers opting for the new regime under Section 115BAC(1A) are not subject to AMT provisions.

   2. Partnership Firm

   A partnership firm, including an LLP, is taxed at a flat rate of 30%.

   Add-On Taxes

   (a) Surcharge
   If the total income exceeds ₹1 crore, surcharge is charged at 12% of the income-tax.
   However, marginal relief applies so that the total tax plus surcharge does not exceed the tax payable on ₹1 crore by more than the income above ₹1 crore.

   (b) Health & Education Cess
   A cess of 4% is levied on the total of income-tax plus surcharge.

   Alternate Minimum Tax (AMT)

   AMT applies when the regular tax is less than 18.5% of adjusted total income. In such cases, tax is computed at 18.5% on the adjusted total income.

   For non-company assessees operating as units in an IFSC and earning exclusively in convertible foreign exchange, AMT is reduced to 9% (plus surcharge and cess).

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   3. Local Authority

   A local authority is taxable at a 30% rate.

   Add-On Taxes

   (a) Surcharge
   If income exceeds ₹1 crore, surcharge at 12% is applied, subject to marginal relief so that tax plus surcharge does not exceed the tax on ₹1 crore by more than the excess income.

   (b) Health & Education Cess
   Cess at 4% is charged on income-tax plus surcharge.

   Alternate Minimum Tax (AMT)

   AMT applies when regular tax is less than 18.5% of adjusted total income, making 18.5% the effective tax rate.

   For companies located in an IFSC and earning solely in foreign exchange, AMT is 9%.

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   4. Domestic Company

   The tax rates for domestic companies for AY 2025–26 and 2026–27 are as follows:

   Category	AY 2026–27	AY 2025–26
   Company with turnover ≤ ₹400 crore in the relevant previous year	25% (PY 2023–24)	25% (PY 2022–23)
   Any other domestic company	30%	30%

   Add-On Taxes

   (a) Surcharge

   • 7% if total income > ₹1 crore but ≤ ₹10 crore

   • 12% if income exceeds ₹10 crore
     Subject to marginal relief ensuring:

     • For income between ₹1–10 crore: tax + surcharge ≤ tax on ₹1 crore + excess income

     • For income > ₹10 crore: tax + surcharge ≤ tax on ₹10 crore + excess income

   (b) Health & Education Cess
   Cess at 4% on income-tax plus surcharge.

   Minimum Alternate Tax (MAT)

   MAT applies when normal tax is less than 15% of book profit. Tax is then computed at 15% of book profit.

   For IFSC units earning exclusively in convertible foreign exchange, MAT rate is 9%.

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   4.1 Special Tax Rates for Domestic Companies

   Certain concessional corporate tax regimes are available:

   Section	Particulars	Tax Rate
   115BA	Optional scheme for certain manufacturing companies	25%
   115BAA	Concessional regime without incentives/deductions	22%
   115BAB	For new manufacturing companies satisfying notified conditions	15%

   Surcharge & Cess

   • For 115BAA and 115BAB, surcharge is a flat 10%, regardless of income level.

   • Health & Education Cess applies at 4%.

   MAT Applicability

   • Companies choosing 115BAA or 115BAB are exempt from MAT.

   • MAT continues to apply where 115BA is chosen.

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   5. Foreign Company

   Applicable income-tax rates for AY 2025–26 and 2026–27:

   Type of Income	Tax Rate
   Royalty or technical service fees per agreements entered within the eligible historical period (with Central Government approval)	50%
   All other income	35%

   Add-On Taxes

   (a) Surcharge

   • 2% when income exceeds ₹1 crore but ≤ ₹10 crore

   • 5% when income exceeds ₹10 crore
     Marginal relief ensures the surcharge does not create a disproportionate tax burden beyond the excess income.

   (b) Health & Education Cess
   4% cess on income-tax plus surcharge.

   Minimum Alternate Tax (MAT)

   MAT is levied at 15% of book profit, unless the foreign company:

   • Has no permanent establishment (PE) in India, or

   • Is taxed under presumptive schemes: Sections 44B, 44BB, 44BBA, 44BBB.

   In such cases, MAT does not apply.

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   6. Co-operative Society

   Tax slabs for AY 2025–26 and 2026–27:

   Taxable Income	Rate
   Up to ₹10,000	10%
   ₹10,000–₹20,000	20%
   Above ₹20,000	30%

   Add-On Taxes

   (a) Surcharge

   • 7% when income > ₹1 crore but ≤ ₹10 crore

   • 12% when income > ₹10 crore
     Subject to marginal relief.

   (b) Health & Education Cess
   4% on tax plus surcharge.

   Alternate Minimum Tax (AMT)

   AMT at 15% of adjusted total income applies if normal tax is lower.
   For IFSC units earning solely in convertible foreign exchange, AMT is 9%.

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   6.1 Optional Tax Regimes for Co-operative Societies

   Co-operatives may opt for concessional regimes subject to eligibility:

   Section	Key Conditions	Tax Rate
   115BAE	New co-op (registered on/after 01-04-2023), engaged in manufacturing, commenced production before 31-03-2024, and does not claim specified deductions	15% (manufacturing income)
   115BAD	If the society forgoes specified exemptions/deductions	22%

   Surcharge & Cess

   • Surcharge is 10% flat under both schemes.

   • Health and Education Cess at 4% applies.

   AMT Exemption

   Co-operatives opting for 115BAD or 115BAE are not subject to AMT, and no AMT credit can be computed or carried forward.

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Revised ITR forms will be released by January 2026.

The Income Tax Department has announced that the new Income Tax Return (ITR) forms and rules will be notified by January 2026 for Financial Year 2025–26 (Assessment Year 2026–27).

CBDT Chairman Ravi Aggarwal has confirmed that these new forms will be simpler, more user-friendly, and easier to file, ensuring that taxpayers and the tax ecosystem get sufficient time to adjust to the updated system.

This advance announcement is a major compliance reform aimed at reducing last-minute rush, errors, and extensions during the filing season.

Why Are the New ITR Forms Being Released Early? (Key Reason)

The Income Tax Department has chosen to issue the upcoming ITR forms much earlier than before for a very specific reason.

Previously, the forms were released late, which led to several recurring problems:

• Taxpayers didn’t get enough time to understand the updated forms

• Tax professionals faced excessive workload and frequent delays

• Software providers struggled to update their systems on time

• AIS/TIS mismatches surfaced too late in the filing cycle

• Filing deadlines had to be extended multiple times

• Late notifications also slowed down return processing and refund issuance

To prevent these year-after-year disruptions, the Government now aims to achieve:

✔ Timely release of forms
✔ Early readiness of the software ecosystem
✔ A smoother filing season
✔ Reduced pressure on taxpayers and professionals
✔ No requirement for deadline extensions

This is the core reason why the new ITR forms are being scheduled for early notification—by January 2026.

What Will Be New in the Upcoming ITR Forms? (Likely Features)

While the final versions of the new ITR forms are still awaited, government updates and recent policy changes indicate that several enhancements are on the way.

1. Simpler and More Compact Formats

• Considerably reduced manual data entry

• Fewer supporting documents or annexures

• Better-organized and clearly defined schedules

• Instructions written in easy, plain language

2. Enhanced Prefilled Information

The new system is expected to pull data automatically from multiple sources, including:

• AIS

• TIS

• Form 26AS

• GST data for businesses

• Capital gains statements from brokers

This expanded prefilled data will minimize mistakes and speed up return filing.

3. Smart, Category-Based ITR Structure

The government may introduce separate streamlined forms designed specifically for:

• Salaried individuals

• Small businesses

• Professionals

• Senior citizens

• Taxpayers with capital gains

• Companies, LLPs, trusts, and other complex entities

4. Better Technology and Automated Error Checks

• Instant alerts for mismatches

• Automatic validation before filing

• Elimination of duplicate entries

• More seamless coordination with e-verification and refund systems

The decision to notify the new ITR forms by January 2026 represents a major reform in India’s tax administration. The objective is straightforward:
simple forms + early release + a smoother filing season.

With this early announcement, taxpayers, accountants, and software providers get ample time to prepare before the new forms become mandatory from 1 April 2026. This is expected to reduce errors, minimize mismatches, and create a much better filing experience overall.