The federal government has proposed revised income tax slabs for salaried individuals in the Finance Bill 2026–27, aimed at reducing the burden on middle- and upper-income earners while keeping relief unchanged for lower-income groups.
Key Tax Structure Changes (Proposed)
- Annual income up to Rs600,000: remains tax-free
- Income from Rs600,000 to Rs1.2 million: taxed at 1% on amount above Rs600,000 (unchanged)
Mid-Income Slabs (Major Relief Zone)
- Rs2.2 million – Rs3.2 million: tax reduced from 23% → 20%
- Rs3.2 million – Rs4.1 million: tax reduced from 30% → 25%
New Higher-Income Slabs Introduced
- Rs4.1 million – Rs5.6 million: 29% tax
- Rs5.6 million – Rs7 million: 32% tax
- Above Rs7 million: 35% tax (earlier applied from Rs4.1 million)
Surcharge Removal
- Salaried individuals earning above Rs10 million annually will no longer pay the 9% surcharge on total tax liability under the proposed bill.
Monthly Salary Tax Impact (Proposed vs Existing System)
No Change Segment
- Rs49,999 → Rs0 (no tax change)
- Rs60,000 to Rs175,000 → tax remains unchanged across slabs
Moderate Relief Segment
- Rs200,000 → Rs13,000 (from Rs13,500) → Rs500 saving
- Rs250,000 → Rs23,000 (from Rs25,000) → Rs2,000 saving
- Rs300,000 → Rs34,667 (from Rs38,833) → Rs4,167 saving
- Rs400,000 → Rs62,000 (from Rs71,750) → Rs9,750 saving
- Rs500,000 → Rs92,000 (from Rs106,750) → Rs14,750 saving
Higher Savings Segment (Surcharge Impact Removed)
- Rs900,000 → Rs229,500 (from Rs268,958) → Rs39,458 saving
- Rs1,000,000 → Rs264,500 (from Rs307,108) → Rs42,608 saving
Key Takeaways
- No change in tax for salaries up to Rs175,000 monthly
- Meaningful relief begins from Rs200,000 monthly
- Maximum benefit seen at higher incomes due to removal of 9% surcharge
- Larger earners see proportionally higher savings under revised structure
The final impact will depend on approval of the Finance Bill and final adjustments for allowances, exemptions, and payroll deductions.
