Section 202 · Special cases
Section 202 of the Income-tax Act, 2025 — New Tax Regime for Individuals, HUF and Others (Old Section 115BAC)
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter XIII
📜 What the law says — Section 202, Income-tax Act 2025
202. (1) Irrespective of anything contained in this Act other than Chapter XVII-B
but subject to Parts A, B, E and this Part of this Chapter, the income-tax payable
by a person, being—
(a) an individual; or
(b) a Hindu undivided family; or
(c) an association of persons (other than a co-operative society); or
(d) a body of individuals, whether incorporated or not; or
(e) an artificial juridical person referred to in section 2(77)(g),
in respect of the total income for a tax year, shall, unless the person exercises the
option in the manner provided under sub-section (4), be computed at the rate of
tax given in the following Table:—
TABLE
Sl. No. Total income Rate of tax
A B C
1. Upto ` 400000 Nil
2. From ` 400001 to ` 800000 5%
3. From ` 800001 to ` 1200000 10%
4. From ` 1200001 to ` 1600000 15%
5. From ` 1600001 to ` 2000000 20%
6. From ` 2000001 to ` 2400000 25%
7. Above ` 2400000 30%
(2) For the purposes of sub-section (1), the total income of the assessee shall be
computed—
(a) without any exemption or deduction under—
(i) Schedule III (Table: Sl. No. 5 or 6 or 7 or 8 or 11 or 17);
(ii) Schedule III (Table: Sl. No. 12 or 13) (other than those as may be
prescribed for this purpose);
(iii) 25[***]
(iv) section 19(1) (Table: Sl. No. 1);
(v) section 22(1)(b), in respect of properties referred to in section 21(6)6;
(vi) section 33(8);
(vii) section 48;
(viii) section 49;
(ix) section 45(3)(a) or (b) or (c);
(x) section 46;
(xi) section 47(1)(a); and
(xii) Chapter VIII other than the provisions of section 124(1) and 124(2),
or 125(2) or 146; and
(b) without set off of—
(i) any loss
In plain language
What is Section 202 of the Income-tax Act, 2025?
Section 202 is the heart of personal income tax in India's new Income-tax Act, 2025, which replaces the six-decade-old Income-tax Act, 1961 from 1 April 2026. It contains the new tax regime — the concessional, low-rate, low-deduction system that was earlier housed in Section 115BAC of the 1961 Act. The law has been renumbered and rewritten in simpler language, but the scheme itself continues: lower slab rates in exchange for giving up most deductions and exemptions. Importantly, the new regime under Section 202 is the default regime — your tax is computed under it automatically unless you actively opt for the old regime.
Who does Section 202 apply to?
- Individuals — salaried employees, pensioners, freelancers, professionals and business owners, whether resident or non-resident.
- Hindu Undivided Families (HUFs).
- Association of Persons (AOP), other than a co-operative society.
- Body of Individuals (BOI), whether incorporated or not.
- Artificial Juridical Persons referred to in section 2(77)(g) of the 2025 Act.
Companies, firms/LLPs and co-operative societies are outside Section 202 — they have their own special-rate provisions.
Slab rates under Section 202
The slab structure carried into the 2025 Act (as introduced from FY 2025-26) starts with a nil rate up to ₹4,00,000 and rises in ₹4-lakh bands to a top rate of 30% above ₹24,00,000 (see the table below). On top of the slab tax, surcharge applies at high incomes — but under the new regime the maximum surcharge is capped at 25% (the 37% surcharge of the old regime does not apply) — plus 4% health and education cess.
The ₹12 lakh "zero tax" rebate
Section 202 works together with Section 156 (the successor of Section 87A). A resident individual with total income up to ₹12,00,000 gets a rebate of 100% of tax or ₹60,000, whichever is lower — bringing tax to zero. For salaried taxpayers, the ₹75,000 standard deduction means salary up to about ₹12,75,000 is effectively tax-free. Marginal relief protects those whose income just crosses ₹12 lakh, so the extra tax can never exceed the extra income. Note: the rebate does not apply against income taxed at special rates (e.g. certain capital gains).
What you give up — deductions and exemptions not allowed
- House Rent Allowance (HRA) and Leave Travel Concession exemptions.
- Home loan interest on a self-occupied house (interest on a let-out property remains deductible against rental income).
- Most Chapter VIII deductions of the 2025 Act — the equivalents of 80C (LIC/PPF/ELSS), 80D (health insurance), 80G (donations), etc.
- SEZ unit deduction (old Section 10AA) and most special allowances.
- Set-off of brought-forward losses or unabsorbed depreciation that relate to the disallowed deductions.
What is still allowed under Section 202
- Standard deduction of ₹75,000 from salary/pension.
- Employer's NPS contribution — deduction under Section 124(1) of the 2025 Act (old 80CCD(2)).
- Family pension deduction up to ₹25,000.
- Agniveer Corpus Fund contribution — Section 125(3).
- Gratuity, leave encashment, retrenchment compensation exemptions, and gifts up to ₹50,000.
How to opt out (choose the old regime)
- No business/professional income: simply choose the old regime in your ITR each year, before the due date. You can flip regimes year to year.
- Business/professional income: you must file the prescribed opt-out form (currently Form 10-IEA) before the return due date. The choice is sticky — you can return to the new regime only once in a lifetime, and after that you can never opt for the old regime again.
Practical implications
For most taxpayers with limited investments and no HRA/home-loan benefits, Section 202 gives lower tax with zero paperwork. Taxpayers with large 80C-type investments, high HRA and self-occupied home-loan interest should compute tax both ways before opting out. Since the 2025 Act applies from tax year 2026-27, returns filed from AY 2027-28 onwards will cite Section 202 instead of Section 115BAC — the substance, rates and rebate mechanics remain the same.
💡 Example
Example 1 — Salaried, ₹12.75 lakh salary (zero tax): Rohan earns a gross salary of ₹12,75,000. Standard deduction of ₹75,000 brings his total income to ₹12,00,000. Slab tax: nil on the first ₹4,00,000; 5% on ₹4–8 lakh = ₹20,000; 10% on ₹8–12 lakh = ₹40,000. Tax = ₹60,000. The Section 156 rebate wipes out the full ₹60,000, so his tax payable is ₹0.
Example 2 — Total income ₹18,00,000: Meera, a consultant, has total income of ₹18,00,000 under the new regime. Tax: nil up to ₹4 lakh + ₹20,000 (5% of ₹4L) + ₹40,000 (10% of ₹4L) + ₹60,000 (15% of ₹4L) + ₹40,000 (20% of ₹2L above ₹16 lakh) = ₹1,60,000. Add 4% cess of ₹6,400 → total ₹1,66,400. No rebate applies since income exceeds ₹12 lakh.
A short story: Priya, a 29-year-old software engineer in Jaipur, used to spend every March scrambling to buy an ELSS fund and collect rent receipts to save tax under the old regime. When her salary rose to ₹12.6 lakh, her CA showed her that under Section 202 she pays nothing at all — the ₹75,000 standard deduction plus the ₹60,000 rebate take her bill to zero, with no proofs, no lock-ins and no last-minute investments. She now invests for returns, not for tax breaks — exactly the behaviour the new regime is designed to encourage.
| Total income slab | Rate under Section 202 (new regime) | Tax on the full slab |
|---|
| Up to ₹4,00,000 | Nil | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹40,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | ₹60,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | ₹80,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | ₹1,00,000 |
| Above ₹24,00,000 | 30% | — |
Related sections
Section 156 — Rebate for resident individuals (old Section 87A, up to ₹60,000) Section 19 — Deductions from salary, including the ₹75,000 standard deduction Section 124 — NPS deduction; employer contribution allowed even in the new regime Section 123 — Deduction for life insurance, PPF etc. (old regime only, ex-80C) Section 125 — Agniveer Corpus Fund deduction, allowed under Section 202 Section 115BAC of the Income-tax Act, 1961 — the corresponding earlier provision
Frequently asked questions
Is the new tax regime under Section 202 the default?
Yes. Section 202 is the default regime for individuals, HUFs, AOPs (other than co-operatives), BOIs and artificial juridical persons. Your employer and the ITR utility compute tax under it automatically unless you actively opt for the old regime.
Is income up to ₹12 lakh really tax-free under Section 202?
Yes, for resident individuals. The Section 156 rebate (100% of tax or ₹60,000, whichever is lower) makes total income up to ₹12,00,000 tax-free, and salaried taxpayers effectively pay nothing up to about ₹12,75,000 after the standard deduction. The rebate does not cover income taxed at special rates, such as certain capital gains.
Can I claim 80C, HRA or home-loan interest under Section 202?
No. HRA, LTC, 80C-type investment deductions, health insurance deductions and self-occupied home-loan interest are all unavailable under the new regime. Interest on a let-out property remains deductible against rental income.
Which deductions survive under the new regime?
The ₹75,000 standard deduction on salary or pension, employer's NPS contribution under Section 124(1), family pension deduction up to ₹25,000, the Agniveer Corpus Fund deduction, and exemptions like gratuity and leave encashment.
How do I opt out of Section 202 and use the old regime?
If you have no business or professional income, just select the old regime in your ITR before the due date — you can change your choice every year. If you have business or professional income, you must file the prescribed form (currently Form 10-IEA) before the due date, and you can switch back to the new regime only once in your lifetime.
What happens if my income is just above ₹12 lakh, say ₹12,10,000?
Marginal relief applies. Slab tax on ₹12,10,000 would be ₹61,500, but since your income exceeds ₹12 lakh by only ₹10,000, your tax is capped at ₹10,000 (plus 4% cess), so you are never worse off for earning slightly more.
What is the maximum surcharge under Section 202?
Under the new regime the highest surcharge rate is capped at 25% for income above ₹2 crore, compared with 37% under the old regime. This lowers the peak effective tax rate to about 39%.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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