Income Tax Slabs Budget 2026 Everything You Need To Know

The wait is finally over. Finance Minister Nirmala Sitharaman presented the Union Budget 2026 on Sunday, and as always, the eyes of millions were glued to the screens for one thing: income tax changes. If you were hoping for a massive overhaul of the tax slabs or a huge jump in the standard deduction, the reality of Budget 2026 might feel a bit more like a "maintenance year" than a "bonanza year."

​The government has taken a clear path of stability and simplification. Instead of changing the tax rates every few months, the focus has shifted toward making the system easier to navigate. While the headline tax rates remained steady, there are several procedural shifts and smaller relief measures that will affect how you manage your money.

​No News Is Good News For Tax Slabs

​Let us get the biggest question out of the way first. Were there any changes to the income tax slabs in Budget 2026? The short answer is no. The Finance Minister decided to keep the existing tax structure intact for the financial year 2026-27.

​The government’s logic is quite simple: they want to establish the New Tax Regime as the steady, predictable choice for everyone. By not changing the slabs this year, they are providing a sense of continuity. If you have already planned your investments and savings based on last year’s rules, you do not have to scramble to change your strategy.

​

The New Tax Regime Breakdown

​Since the New Tax Regime remains the default option, it is important to know exactly where you stand. Even without new changes, the current slabs are designed to be quite friendly to the middle class, especially with the rebate system.

​Under the New Tax Regime for FY 2026-27, the slabs are as follows:

• ​Up to 4 lakh: Nil

• ​4 lakh to 8 lakh: 5%

• ​8 lakh to 12 lakh: 10%

• ​12 lakh to 16 lakh: 15%

• ​16 lakh to 20 lakh: 20%

• ​20 lakh to 24 lakh: 25%

• ​Above 24 lakh: 30%

​The real magic happens with Section 87A. If your total taxable income is up to 12 lakh, you effectively pay zero tax because of the tax rebate. For salaried employees, adding the standard deduction of 75,000 means that someone earning up to 12.75 lakh annually can walk away without paying a single rupee in income tax.

​The Old Tax Regime Still Hangs On

​For those who love their deductions like LIC, Public Provident Fund (PPF), and home loan interest, the Old Tax Regime is still available. However, there were no updates here either. The basic exemption limit remains at 2.5 lakh for individuals below 60 years.

​The gap between the two regimes is widening. While the old regime allows you to lower your taxable income through various investments, the new regime offers much lower rates without the headache of keeping dozens of investment proofs. The government is clearly nudging everyone toward the simpler, "no-deduction" path.

​The Big Shift To The New Income Tax Act 2025

​While the slabs did not move, the rulebook is changing. The Finance Minister confirmed that the New Income Tax Act, 2025, will officially roll out on April 1, 2026. This is a massive deal. The current law is over sixty years old and has become a tangled web of amendments.

​The goal of this new Act is to make the language simpler and the processes faster. It aims to reduce litigation and make the life of a common taxpayer easier. You might not see a lower tax rate on your payslip because of this, but you will likely see less paperwork and fewer confusing notices from the department.

​

More Time To Fix Mistakes

​One of the most human-friendly updates in this Budget is the extension of the deadline for revised returns. We have all been there—submitting a return only to realize we forgot to mention a small interest payment or a dividend.

​Previously, the window to file a revised return closed on December 31. Budget 2026 has extended this window to March 31. This gives you three extra months to correct any errors. There might be a small nominal fee involved, but it is a much better alternative than facing a penalty for a genuine mistake.

​Travel And Health Get A Small Boost

​If you enjoy traveling abroad, there is some genuine relief for you. The Tax Collected at Source (TCS) on overseas tour packages has been significantly slashed. Previously, you could be charged up to 20% depending on how much you spent. Now, it has been proposed as a flat 2% with no minimum threshold.

​This is not a reduction in tax itself (since you can claim TCS back when you file your returns), but it means less of your money is "stuck" with the government during the year. It improves your immediate cash flow when booking that dream vacation. Similarly, certain medical and education-related foreign remittances have also seen a reduction in TCS rates to 2%.

​

Simplification Of The Compliance Process

​The Budget also focused on making the "backend" of taxing smoother. For example, the government is merging assessment and penalty proceedings. Instead of getting one notice for an audit and another for a penalty months later, the plan is to handle them together in a single order.

​This might sound like technical talk, but for a taxpayer, it means less time spent waiting in uncertainty. The Budget also proposes to remove criminal penalties for minor procedural lapses, like not maintaining certain records perfectly. It shows a shift in mindset: the government wants to treat taxpayers as partners rather than suspects.

​

What Was Missing From The Speech

​Of course, every Budget has its share of "could have been" moments. Many were hoping for an increase in the Section 80C limit, which has been stuck at 1.5 lakh for a long time. Others wanted a higher deduction for health insurance premiums under Section 80D, given how expensive healthcare has become.

​None of these changes made it into the 2026 Budget. The message is loud and clear: if you want more tax benefits, you should probably consider moving to the New Tax Regime where the rates are naturally lower, rather than waiting for more deductions in the old one.

​Final Thoughts For The Taxpayer

​Budget 2026 is a "stability budget." It does not try to reinvent the wheel or offer flashy gifts to win headlines. Instead, it prepares the ground for a more modern, digital-first tax system under the new 2025 Act.

​For the average person, your tax planning remains largely the same as last year. If you are earning in the middle-income bracket, the New Tax Regime continues to be an incredibly attractive option with its 12 lakh zero-tax threshold. If you are a high-net-worth individual or a frequent traveler, the procedural changes in TCS and revised filings will be your main takeaways.