The New Tax Regime is Now Default
The most significant update for taxpayers is that the New Tax Regime is now the default option. This means if you do not explicitly choose a regime, your taxes will be calculated under the new, simplified structure which offers lower tax rates but disallows
most common deductions like those under Section 80C, 80D, and for HRA. However, you still have the choice to opt for the Old Tax Regime if it is more beneficial for you, especially if you have significant investments and expenses that qualify for deductions. For individuals without a business income, this choice can be made annually directly within the ITR form.
Revised Tax Slabs and Rebates
The New Tax Regime's structure has been made more appealing. While the tax slab rates themselves have not changed for AY 2026-27, the rebate under Section 87A has been enhanced. Under the new regime, if your taxable income is up to ₹12 lakh, you could effectively pay zero tax thanks to this rebate. In contrast, the rebate under the old regime remains applicable for taxable income up to ₹5 lakh. The basic exemption limit under the new regime has also been raised to ₹4 lakh. These changes are designed to provide significant relief to middle-income earners.
Standard Deduction Changes
For salaried individuals and pensioners, there is good news regarding the standard deduction. Under the New Tax Regime, a standard deduction of ₹75,000 can be claimed. This deduction was previously a key reason for many to stick to the old regime. Its inclusion in the new regime makes it a more attractive option. For those opting for the Old Tax Regime, the standard deduction remains at a flat ₹50,000. This update makes the tax-free income limit for salaried individuals under the new regime effectively ₹12.75 lakh.
Updates to ITR Forms and Deadlines
This year sees some important procedural changes. While the tax filing for income earned in FY 2025-26 (which is AY 2026-27) is governed by the old Income Tax Act, 1961, some ITR forms and deadlines have been tweaked. The ITR forms have been updated to include more detailed disclosure requirements, particularly for capital gains and Futures & Options (F&O) trading. The deadline for most salaried individuals (ITR-1, ITR-2) remains July 31, 2026. However, the deadline for non-audit business and professional cases (ITR-3, ITR-4) has been extended to August 31, 2026. Additionally, the deadline for filing a revised return has been extended to March 31, 2027, giving taxpayers more time to correct errors.
Key Considerations for Specific Incomes
Taxpayers with specific types of income need to be extra vigilant. The ITR forms for this year require enhanced reporting for transactions involving Virtual Digital Assets (VDAs) like cryptocurrency, which continue to be taxed at a flat 30%. Similarly, individuals with income from F&O or intraday trading might need to file a more detailed ITR-3 instead of a simpler form. There are also new, stricter disclosure rules for those claiming deductions for donations to political parties under Section 80GGC. It's crucial to use the correct ITR form based on all your income sources to avoid your return being marked as defective.
