Income Tax Act 2025: Section 202 for Tax Year 2026-27

New tax regime for individuals, Hindu undivided family and others

[Section-202 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 202(1) of Income Tax Act 2025

202(1) Irrespective of anything contained in this Act but subject to the provisions of Parts A, B and this Part 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

Section 202(2) of Income Tax Act 2025

202(2) For the purposes of sub-section (1), the total income of the assessee shall be computed—

• 202(2)(a) without any exemption or deduction under the provisions of or in––
  • (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 prescribed for this purpose);
  • (iii) section 144;
  • (iv) section 19(1) (Table: Sl. No. 1);
  • (v) section 22(1)(b), in respect of properties referred to in section 21(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);
  • (xii) of Chapter VIII other than the provisions of sections 124(1), 125(3) and 146; and
• 202(2)(b) without set off of—
  • (i) any loss carried forward or depreciation from any earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a); or
  • (ii) any loss under the head “Income from house property” with any other head of income; and
• 202(2)(c) without any exemption or deduction for allowances or perquisite, called by any name, provided under any other law in force.

Section 202(3) of Income Tax Act 2025

202(3) The loss and depreciation referred to in sub-section (2)(b) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.

Section 202(4) of Income Tax Act 2025

202(4) Nothing contained in sub-section (1) shall apply to a person, where an option is exercised by such person under this section, in such manner as prescribed, for any tax year, and such option is exercised,––

• 202(4)(a) in case of a person having income from business or profession,––
  • (i) on or before the due date specified under section 263(1) for furnishing the returns of income for such tax year;
  • (ii) such option, once exercised, shall apply to subsequent tax years;
  • (iii) such option, once exercised, may be withdrawn only once for a tax year other than the tax year for which it was exercised; and
  • (iv) after such withdrawal, the person shall never be eligible to exercise the option under this sub-section, except where such person ceases to have any income from business or profession, and in such a case the option under clause (b) shall be available;
• 202(4)(b) in case of a person not having income from business or profession, along with the return of income to be furnished under section 263(1) for the tax year.

Section 202(5) of Income Tax Act 2025

202(5) In case of a person, having a Unit in the International Financial Services Centre, who has exercised the option under sub-section (4) for any tax year from 2020-21 to 2023-24, the provisions of sub-section (2) shall be modified to the extent that deduction under the said section shall be available to such Unit subject to fulfilment of the conditions contained in that section.

FAQs on Section 202 of Income Tax Act 2025

What is the new tax regime under Section 202(1)?
It is a default tax regime applicable from 1st April 2026 for individuals, Hindu Undivided Families, certain AOPs, BOIs, and artificial juridical persons. Tax is computed based on a specified slab structure without certain deductions and exemptions.

Who is covered under the new tax regime of Section 202(1)?
The regime applies to individuals, Hindu Undivided Families, associations of persons (excluding co-operative societies), bodies of individuals (incorporated or not), and artificial juridical persons referred to in section 2(77)(g).

What are the tax slabs under Section 202(1)?
Income up to ₹4,00,000 is tax-free. From ₹4,00,001 to ₹8,00,000 the rate is 5%, ₹8,00,001 to ₹12,00,000 is 10%, ₹12,00,001 to ₹16,00,000 is 15%, ₹16,00,001 to ₹20,00,000 is 20%, ₹20,00,001 to ₹24,00,000 is 25%, and income above ₹24,00,000 is taxed at 30%.

Are deductions and exemptions allowed under the new tax regime?
No, Section 202(2) specifically disallows various exemptions and deductions, including those under selected items in Schedule III, sections 144, 19(1), 22(1)(b), 33(8), 48, 49, 45(3), 46, 47(1)(a), and most of Chapter VIII.

Can carried forward losses or depreciation be claimed under this regime?
No, carried forward losses or depreciation related to disallowed deductions are not permitted to be set off. They are treated as fully utilized as per Section 202(3).

Is loss from house property adjustable against other income heads?
No, losses under the head “Income from house property” cannot be set off with any other head of income under this regime.

Can a taxpayer opt out of the new regime?
Yes, a person can opt out by exercising an option under Section 202(4) in the prescribed manner and time.

How and when can a person having business or professional income opt for the old regime?
They must exercise the option on or before the due date under Section 263(1) for filing the return. The option continues for future years and may be withdrawn only once. After withdrawal, re-entry is not allowed unless the person no longer has business or professional income.

How and when can a person without business or professional income opt out?
Such a person may opt out for any tax year by exercising the option along with their return of income filed under Section 263(1).

Can the option once withdrawn be re-exercised later?
No, once the option is withdrawn by a person with business or professional income, they cannot opt in again unless they no longer have such income.

What if a person has a Unit in an International Financial Services Centre and had opted earlier?
For those who exercised the option between 2020-21 and 2023-24, the disallowance under Section 202(2) does not apply to deductions specific to that Unit, subject to conditions of the relevant section.

Is the new tax regime mandatory for all eligible persons?
Yes, it applies by default unless the person opts out as per Section 202(4).