The Union Budget 2026–27, presented by Finance Minister Nirmala Sitharaman, has drawn significant attention from taxpayers across India — especially salaried citizens, professionals, and business owners. While the headline tax rates and slabs remain largely unchanged, there are important updates in tax policy, compliance rules, and deductions that can affect how much tax you pay and how you plan your finances.
Let’s dive deep into what has changed, what stayed the same, and how it affects you.
📌 1) Income Tax Slabs — No Change in Rates
Contrary to some expectations, the basic income tax slabs and rates under both the new tax regime and old tax regime have not changed in the 2026 budget. This means the structure introduced earlier continues for FY 2026–27.
🟢 New Tax Regime (Default)
Under the new tax regime for FY 2026–27, income is taxed progressively as follows:
| Taxable Income (₹) | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
This regime is simpler because most deductions/exemptions (like 80C, HRA etc.) are not available, but the slabs and rates remain stable.
📈 2) Section 87A — Rebate and Zero Tax Window
While slabs haven’t changed, the rebate under Section 87A still plays a key role under the new tax regime:
- Taxable income up to ₹12 lakh can reduce tax liability to zero with Section 87A rebate.
- Salaried individuals enjoy a standard deduction (e.g., ₹75,000), which effectively increases the no-tax income threshold up to ~₹12.75 lakh.
This rebate is especially beneficial for middle-class taxpayers looking to minimize their tax outgo.
📜 3) New Income Tax Act, 2025 — Simplification & Structure
One of the biggest changes announced in Budget 2026 is not the slabs, but the structure of the law itself.
📌 New Income Tax Act, 2025
- A new Income Tax Act — known as the Income Tax Act, 2025 — will come into effect from 1 April 2026.
- This Act replaces the older tax law and aims to simplify language, tax computation rules, and compliance procedures.
- Tax rates remain the same, but rules are clearer and filing processes are streamlined.
This shift reflects the government’s intention to make the tax code more transparent and user-friendly without altering popular slabs.
🧾 4) Draft Income Tax Rules, 2026 — Key Updates
Alongside the new Act, the government has released draft Income Tax Rules 2026, which propose meaningful reforms for taxpayers:
🔹 Major Changes Proposed
✔️ Higher exemptions for allowances like HRA and hostel allowance
• Offers up to ₹9,000 per month for hostel allowance, boosting savings.
✔️ Updated valuation for employer-provided benefits (like motor car use)
• Affects how perquisites are taxed and could reduce tax liability in some cases.
✔️ More cities included for 50% HRA exemptions
• Helps taxpayers living in expensive metros save more.
✔️ Mandatory PAN quoting in more transactions
• Improves compliance, transparency, and ease of tracking tax liabilities.
📊 5) Income Disclosure & Unexplained Income Tax Changes
One standout proposal in the 2026 tax framework is about unexplained income: (The Economic Times)
🟡 Voluntary Disclosure Scheme (Not Officially Named)
- Tax rate on unexplained income (previously ~60%) may now be as low as 30% if voluntarily disclosed in your Income Tax Return.
- This change encourages taxpayers to self-report additional incomes and reduce disputes.
However, undisclosed income detected by authorities continues to attract stricter penalties.
🧾 6) ITR Filing Deadline & Compliance Ease
While slabs are unchanged, the government made several process changes to make compliance easier: (DD News)
✔️ ITR filing deadlines relaxed
• Due dates for ITR filing extended for certain categories to reduce hurry and mistakes.
✔️ Simplified ITR forms
• Draft rules introduce more user-friendly forms to minimize complexity. (The Times of India)
These steps help reduce errors and delinquency in tax filing.
🧠 7) Which Tax Regime Should You Choose?
Although slabs remain the same, choosing the right regime matters:
🔹 New Regime
✔ Lower basic rates
✔ No/limited deductions
✔ Ideal if you don’t claim many exemptions
🔹 Old Regime
✔ Full exemptions & deductions (80C, HRA, home loan interest)
✔ Could save more if you manage deductions strategically
Comparing both regimes with your income, deductions, and investments is crucial before filing taxes.
📌 Summary — Key Takeaways
| Aspect | Status After Budget 2026 |
|---|---|
| Tax slabs & rates | No change compared to previous year |
| New Income Tax Act, 2025 | Effective from 1 April 2026 |
| Section 87A rebate | Tax may be zero up to ₹12 lakh income |
| Draft Rules 2026 | Higher exemptions & simplified compliance |
| Unexplained income | Lower tax on voluntary disclosures |
| ITR filing | Deadlines extended; forms simplified |
📍 Conclusion
The Union Budget 2026–27 reinforces continuity in tax slabs while modernising the entire system through a new statute, rules, and compliance reforms. Taxpayers should not only understand the slab rates, but also take advantage of improved deductions, compliance ease, and strategic planning opportunities introduced in this tax cycle.