The Maximum Marginal Rate (MMR) of income tax for the tax year 2026-2027 is established at 39% under the new tax regime, designed to prevent high-income earners from reducing their tax liabilities through income splitting among various entities. This rate applies to specific categories including business trusts, Alternative Investment Funds (AIFs), and private discretionary trusts, as outlined in the Income-tax Act. The MMR is defined as the highest income tax rate applicable to individuals, Associations of Persons (AOPs), or Bodies of Individuals (BOIs) as specified in the Finance Act. Under the new tax regime, the highest slab rate is 30%, with an additional 25% surcharge, resulting in a total MMR of 39%. However, under the old tax regime, the MMR can increase to 42.744% due to a higher surcharge rate. This higher rate applies in specific instances, particularly for AOPs and BOIs, where members may be taxed at a higher rate. Taxpayers are advised to identify their applicable tax regime and the relevant surcharge thresholds to determine their effective tax rate accurately.