Income Tax Rules After Budget 2026: The Union Budget 2026-27, which was presented by Finance Minister Nirmala Sitharaman on February 1, has not introduced any changes in income tax rates and slabs. However,
it has introduced new deadlines for income tax return (ITR) filing. It is necessary to know these deadlines for better tax planning for the financial year 2026-27 staring April 1, when the latest budget provisions become effective.
Budget 2026 Announcements Regarding Income Tax
- According to the Budget Speech 2026-27, any interest awarded by Motor Accident Claims Tribunals to individuals will be exempt from income tax, and no TDS will be deducted on such amounts.
- The TCS rate on overseas tour packages will be cut to 2 per cent, and the same reduced 2 per cent rate will apply to remittances for education and medical purposes under the Liberalised Remittance Scheme.
- A new scheme will allow small taxpayers to get lower or nil TDS certificates through an automated, rule-based process, without approaching the assessing officer.
- Taxpayers will get time till March 31 to revise their returns, instead of the current December 31 deadline, by paying a nominal fee.
- The tax return filing timeline will be staggered, with ITR-1 and ITR-2 filers continuing to file till July 31, while non-audit business cases and trusts will get time till August 31.
- For property bought from non-residents, TDS will be deducted and paid using the resident buyer’s PAN, removing the need to obtain a TAN.
Beginning April 1, the Income Tax Act, 2025, will come into force, replacing the six-decade-old Income Tax Act, 1961.
Tax Slabs & Rates For FY 2026-27
Tax liability for FY 2025-26 will remain same as the existing slab structures, with the new tax regime continuing as the default option.
New Tax Regime: Default for FY 2025-26
Under the new tax regime, individuals earning up to Rs 12 lakh a year are effectively exempt from paying income tax, provided the income qualifies as “normal income”. This excludes special-rate incomes such as short-term capital gains (STCG) and long-term capital gains (LTCG).
The new regime applies automatically. Salaried taxpayers can still opt for the old regime at the time of filing their return. However, a belated ITR, filed after the due date, can only be submitted under the new regime.
New tax regime slabs
- Rs 0 to Rs 4,00,000: Nil
- Rs 4,00,001 to Rs 8,00,000: 5%
- Rs 8,00,001 to Rs 12,00,000: 10%
- Rs 12,00,001 to Rs 16,00,000: 15%
- Rs 16,00,001 to Rs 20,00,000: 20%
- Rs 20,00,001 to Rs 24,00,000: 25%
- Above Rs 24,00,000: 30%
Key benefits under the new regime
- Standard deduction of Rs 75,000 for salaried employees and pensioners
- Section 87A rebate for resident taxpayers with net taxable income up to Rs 12 lakh
- NPS deduction of up to 14% of basic salary for salaried employees under Section 80CCD(2).
Old Tax Regime: Deductions-Driven Structure
The old tax regime continues to attract taxpayers who are able to claim multiple exemptions and deductions. These include Section 80C benefits of up to Rs 1.5 lakh through investments such as PPF, ELSS and LIC, as well as house rent allowance (HRA), leave travel allowance (LTA), home loan interest under Section 24, health insurance premiums under Section 80D, education loan interest under Section 80E and a standard deduction of Rs 50,000 for salaried individuals.
Slabs for individuals below 60 years
- Rs 0 to Rs 2,50,000: Nil
- Rs 2,50,001 to Rs 5,00,000: 5%
- Rs 5,00,001 to Rs 10,00,000: 20%
- Above Rs 10,00,000: 30%
Slabs for senior citizens (60 to below 80 years)
- Rs 0 to Rs 3,00,000: Nil
- Rs 3,00,001 to Rs 5,00,000: 5%
- Rs 5,00,001 to Rs 10,00,000: 20%
- Above Rs 10,00,000: 30%
Slabs for super senior citizens (80 years and above)
- Rs 0 to Rs 5,00,000: Nil
- Rs 5,00,001 to Rs 10,00,000: 20%
- Above Rs 10,00,000: 30%
Which Regime Makes More Sense?
Tax experts suggest that the choice depends largely on income levels and the ability to claim deductions.
“You may benefit from the new regime if you earn up to Rs 12 lakh in a year. Most people fall under this category,” said Aman Sharma, a Delhi-based chartered accountant.
He added that the old regime may still work better if you claim substantial deductions under Sections 80C and 80D, HRA or home loan interest, have invested heavily in tax-saving instruments such as PPF or ELSS, receive salary components like HRA or LTA, or are a senior citizen eligible for multiple deductions.
