Union Budget 2026: No Changes in Income Tax Slabs – Key Highlights for Taxpayers

• Published
• By Anupam Nath

The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, brought no surprises on the personal income tax front. As widely anticipated after the major reforms in the previous budget, there were no revisions to the income tax slabs under either the new or old tax regime for FY 2026-27 (Assessment Year 2027-28). This continuity provides stability for salaried individuals, professionals, and other taxpayers planning their finances. The focus shifted toward simplification through the upcoming new Income Tax Act, 2025, effective from April 1, 2026, rather than immediate rate cuts.

The new tax regime remains the default option for most taxpayers, offering lower rates and wider slabs with minimal deductions. Under this regime, income up to Rs 4 lakh is completely tax-free. The progressive slabs then apply: 5% on income from Rs 4 lakh to Rs 8 lakh, 10% from Rs 8 lakh to Rs 12 lakh, 15% from Rs 12 lakh to Rs 16 lakh, 20% from Rs 16 lakh to Rs 20 lakh, 25% from Rs 20 lakh to Rs 24 lakh, and 30% on income above Rs 24 lakh. For salaried individuals, the standard deduction and rebate under Section 87A make income up to Rs 12.75 lakh effectively tax-free, providing significant relief to the middle class without any further tweaks this year.

In contrast, the old tax regime continues unchanged, allowing various deductions and exemptions such as those under Section 80C (up to Rs 1.5 lakh for investments like PPF, ELSS, or life insurance), Section 80D (health insurance), HRA, home loan interest, and NPS contributions. However, the basic exemption limit is lower at Rs 2.5 lakh (Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens), and tax rates kick in earlier with higher brackets leading to potentially steeper liabilities for those without substantial deductions. Taxpayers with high eligible deductions often find the old regime more beneficial, while those with fewer claims prefer the simplicity and lower rates of the new regime.

Choosing between the regimes depends on individual circumstances. If your total deductions exceed the tax savings from lower rates in the new regime, stick with the old one. For example, someone with significant investments in tax-saving instruments or high HRA claims might save more under the old regime despite its narrower slabs. Conversely, professionals or young salaried employees with limited deductions benefit greatly from the new regime's generous zero-tax threshold up to Rs 12 lakh (or Rs 12.75 lakh for salary earners). Always use an income tax calculator to compare liability under both options before filing returns.

Other notable announcements include the extension of the revised return filing deadline to March 31 for certain cases, allowing taxpayers more time to correct errors or omissions with a nominal fee. Additionally, TCS rates on specific transactions have been reduced, easing the compliance burden for overseas education, medical expenses, and other remittances. These measures aim to build trust and reduce friction in the tax system.

The Budget also emphasized the rollout of the new Income Tax Act, 2025, starting April 1, 2026, which promises simplified rules, redesigned forms, and easier compliance for ordinary citizens. While no immediate slab changes occurred, this long-term reform signals the government's commitment to modernizing taxation without disrupting current structures.

Taxpayers should review their financial year planning carefully. With the filing season approaching and the deadline for revised returns set for March 31, it's an ideal time to optimize investments, claim eligible deductions (if opting for the old regime), or switch regimes if beneficial. Consulting a tax advisor can help maximize savings under the unchanged framework.

In summary, Budget 2026 maintains status quo on income tax slabs, reinforcing the gains from prior years while paving the way for future simplifications. This approach ensures predictability for individuals amid broader economic priorities.