Income Tax Budget 2026 highlights: No change in tax slabs, new act to come into effect from April 1

Union finance minister Nirmala Sitharaman is expected to begin the Budget presentation at 11 am.

This will be Sitharaman's ninth straight Union Budget presentation in the Parliament.

The new tax regime is beneficial to:

• Individuals who do not have significant deductions or investments in tax-savings instruments.
• New entrants to the workforce, who may prefer lower tax rates with few obligations for financial planning, also benefit from the new tax regime.
• Those with a straightforward income structure who prefer ease of calculation over tax-saving investments.

Finance minister Nirmala Sitharaman has arrived at the Kartavya Bhawan ahead of the Budget presentation at 11 am today.

The tax slab structure under the old tax regime is as follows:

• Up to ₹2.5 lakh: Nil
• ₹2.5 lakh to ₹5 lakh: 5%
• ₹5 lakh to ₹10 lakh: 20%
• Above ₹10 lakh: 30%

Under the old tax regime, a taxpayer can claim various deductions, exemptions and rebates to reduce their taxable income. This regime has higher tax rates than the new regime. However, it allows for numerous deductions and exemptions.

Finance minister Nirmala Sitharaman has left from his residence ahead of the Budget session. She will present her ninth consecutive Union Budget in the Parliament at 11 am today.

The tax slabs, as per the revised tax structure, under the new tax regime, following the 2025 Union Budget were as follows:

• ₹0 to ₹4 lakh: Nil
• ₹4 to ₹8 lakh: 5%
• ₹8 to ₹12 lakh: 10%
• ₹12 to ₹16 lakh: 15%
• ₹16 to ₹20 lakh: 20%
• ₹20 to ₹24 lakh: 25%
• Above 24 lakh: 30%

Introduced in Budget 2020, this tax regime offers a lower tax rate but without the ability to claim deductions and exemptions, except for NPS and EPF contributions.

Delhi chief minister Rekha Gupta expressed confidence in the upcoming Union Budget, saying that it will have a positive impact on the national capital's development plans.

CM Gupta further said that the Budget will also support the goal of building a developed Delhi. She noted that the Central government is actively involved in several important projects in the city.

"In such a scenario, it is natural to expect that the forthcoming Union Budget will provide fresh momentum to the overall development of Delhi and further strengthen the vision of Viksit Delhi alongside Viksit Bharat," she said.

UP minister Suresh Kumar Khanna spoke to news agency ANI ahead of the Union Budget 2026 and said, I hope this budget will move the development forward. The budget will also include provisions to create as many jobs as possible. Under the guidance of PM Modi, the country became the 4th largest economy... I hope that businesses will increase."

Union finance minister Nirmala Sitharaman on Sunday, February 1, will present her ninth consecutive Union Budget in the Parliament.

According to Lok Sabha List of Business, the House will convene at 11 am.

What all will Nirmala Sitharaman present today?

• Nirmala Sitharaman will present a statement of the estimated receipts and expenditure of the Government of India for the year 2026-27.
• Sitharaman will also lay on the table two statements, under Section 3(1) of the Fiscal Responsibility and Budget Management (FRBM) Act, 2023. These will also include the Medium-term Fiscal Policy-cum-Fiscal Policy Strategy Statement and the Macro-economic Framework Statement.
• Sitharaman will also move for leave to introduce the Finance Bill, 2026, in the Lok Sabha.

On 1 February, Finance Minister Nirmala Sitharaman will present the Union Budget 2026—her ninth straight budget presentation—amid expectation of an overhaul of customs duty on the lines of GST rationalisation.

For individuals, who last year received a big tax relief by way of higher income tax exception limits and GST rate cuts, are still hoping for higher standard deduction.

What's expected?

• With the new and simplified Income Tax Act, 2025, coming into effect from 1 April 2026, the industry expects the budget to outline transition provisions, rules and FAQ for better understanding.
• A hike in standard deduction to encourage individuals to shift to new income tax regime from the old regime.

Before the Union Budget 2026 presentation in Parliament, both Sensex and Nifty witnessed a drop in early trade on Friday after a three-day rally. While the 30-share BSE Sensex dropped 619.06 points to 81,947.31 in opening trade, the 50-share NSE Nifty dropped 171.35 points to 25,247.55.

Follow live updates on stock market reactions

Individuals can calculate their income tax using the Tax Calculator on the Income Tax Department's official website.

Here's a step-by-step guide:

• Step 1: Go to the e-filing home page.
• Step 2: You need to Select Quick Links and choose tax calculator.
• Step 3: Click the link to go to the Income and Tax Calculator page. There are two options: Basic Calculator and Advanced Calculator. The Basic Calculator tab is selected by default.
• Step 4: In the Basic Calculator tab, you need to enter the details like the Assessment Year, taxpayer category, age, residential status, total annual income and total deductions. The tax calculation will appear in the Tax Summary section, according to the details you entered.
• Step 5: In the Advanced Calculator tab, you need to enter more details, including Preferred tax regime, AY, taxpayer category, age, residential status, due date and actual date of submission of return.

According to the income tax department, an individual, HUF, AOP (not being co-operative societies), BOI or artificial juridical person with business or professional income will not be eligible to choose between the two regimes every year. Once the taxpayer opts out of the new tax regime, they can switch back only one time. Once they switch back to the new regime, they will not be able to choose the old regime anytime in future. Meanwhile, any individual with non-business income can switch between the new and old tax regimes every year. The choice of the old tax regime can be made only before the due date of filing the return u/s 139(1) of the IT Act.

The choice of tax regime depends entirely on the taxpayer's source of income and eligibility for deductions. It is advised that a comparative evaluation and analysis be conducted by a taxpayer before opting for a particular regime.

The tax slabs and rates are different in the old and new tax regimes. While various deductions and exceptions are allowed in the old tax regime, the new regime offers lower rates of taxes, but allows limited deductions and exemptions.

The Income Tax Act, 2025, was introduced to modernise India's direct tax framework, aimed at simplifying and streamlining tax legislation, making it transparent and less prone to litigation.

The Act aims to reduce taxpayer confusion and improve voluntary compliance. It also seeks to minimise disputes through clearer definitions and harmonised assessment timelines.

In essence, the Act is designed not to overhaul tax rates, but to overhaul the tax experience - making it more predictable, efficient, and digitally enabled.

-Tax Year: The new act replaced the previously used terms 'assessment year' and 'previous year' with a single, unified concept -- 'Tax Year'. It has been defined as the twelve-month period of the financial year, starting April 1. The change is introduced to bring more clarity and make it easier for taxpayers to understand which financial period their income and tax filings relate to.

-Power to frame schemes: The Act also authorises the Centre to design new schemes aimed at improving efficiency, transparency, and accountability in tax administration.

-Simplified compliance: Multiple provisions have been brought together for more clarity.

-Digital-first enforcement: Virtual digital space has been defined as an environment, area, or realm that is constructed and experienced through computer technology. It includes email servers, cloud servers, social media accounts, etc. The scope of Virtual Digital Assets has been broadened to cover any asset that holds value in digital form and operates using cryptographic ledger systems such as cryptocurrencies or similar technologies.

-Dispute resolution: The Income Tax Act, 2025 introduces a more robust and taxpayer-friendly framework for resolving disputes.

Income Tax Bill 2025 was introduced in the Parliament on February 13, 2025, to replace the six-decade-old IT Act, 1961.

The bill was sent to a Select Committee chaired by BJP MP Baijayant Panda, which later submitted its report listing changes and recommendations in the bill.

Following this, finance minister Nirmala Sitharaman formally withdrew the Income Tax Bill, 2025 on August 8. The government reportedly withdrew the bill to avoid confusion caused by multiple versions of the legislation, ensuring that lawmakers have a single, consolidated draft reflecting all proposed changes.

On August 11, an updated Income Tax Bill 2025 was introduced in the Lok Sabha. The new bill aimed to simplify terminology used in tax laws in India, thereby making it easier for taxpayers to pay taxes and file returns.

Prime Minister Narendra Modi had hailed the 2025 Union Budget as an "important milestone in India's development journey". He said that the budget fulfills the dreams of every Indian.

On the new income tax slabs, PM Modi had said, "In this budget, income up to ₹12 lakh per annum has been made tax-free. For all income groups, taxes have been reduced. It will hugely benefit our middle class. It will be an opportunity for the people who have recently joined the workforce..."

Here's what finance minister Nirmala Sitharaman said about income tax during the presentation of the Union Budget 2025 in the Parliament:

"Our Government is committed to keeping an ear to the ground and a finger on the pulse, and responding while balancing our nation-building efforts. My tax proposals are guided by the spirit of understanding and addressing the needs of the citizens."

"The objectives of my proposals are as follows:

(i) Personal Income Tax reforms with special focus on middle class

(ii) Rationalization of TDS/TCS for easing difficulties

(iii) Encouraging voluntary compliance

(iv) Reducing compliance burden

(v) Ease of doing business

(vi) Employment and investment

I will come to my proposal on personal income tax towards the end.

TDS/TCS rationalization for easing difficulties"

“I propose to rationalize Tax Deduction at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted. Further, threshold amounts for tax deduction will be increased for better clarity and uniformity. The limit for tax deduction on interest for senior citizens is being doubled from the present '50,000 to 1 lakh'. Similarly, the annual limit of '2.40 lakh for TDS on rent is being increased to 6 lakh'. This will reduce the number of transactions liable to TDS, thus benefitting small tax payers receiving small payments.”

"The threshold to collect tax at source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) is proposed to be increased from 7 lakh to ₹10 lakh. I also propose to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution."

"Nearly 90 lakh taxpayers voluntarily updated their incomes by paying additional tax. Taking this trust further, I now propose to extend the time-limit to file updated returns for any assessment year, from the current limit of two years, to four years."

"The middle class provides strength for India’s growth. This Government under the leadership of Prime Minister Modi has always believed in the admirable energy and ability of the middle class in nation building. In recognition of their contribution, we have periodically reduced their tax burden. Right after 2014, the ‘Nil tax’ slab was raised to ₹2.5 lakh, which was further raised to ` 5 lakh in 2019 and to ` 7 lakh in 2023. This is reflective of our Government’s trust on the middle-class tax payers. I am now happy to announce that there will be no income tax payable upto income of ` 12 lakh (i.e. average income of ` 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be ` 12.75 lakh for salaried tax payers, due to standard deduction of ₹75,000. 157. Slabs and rates are being changed across the board to benefit all tax-payers. The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment."

"In the new tax regime, I propose to revise tax rate structure as follows:

0-4 lakh rupees Nil

4-8 lakh rupees 5 per cent

8-12 lakh rupees 10 per cent

12-16 lakh rupees 15 per cent

16-20 lakh rupees 20 per cent

20- 24 lakh rupees 25 per cent

Above 24 lakh rupees 30 per cent"

"To tax payers upto ₹12 lakh of normal income (other than special rate income such as capital gains) tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them. The total tax benefit of slab rate changes and rebate at different income levels can be illustrated with examples. A tax payer in the new regime with an income of ₹12 lakh will get a benefit of ₹80,000 in tax (which is 100% of tax payable as per existing rates). A person having income of ₹18 lakh will get a benefit of ₹70,000 in tax (30% of tax payable as per existing rates). A person with an income of ₹25 lakh gets a benefit of ₹1,10,000 (25% of his tax payable as per existing rates)."

While presenting Union Budget 2025, finance minister Nirmala Sitharaman had announced that a new income tax bill would be introduced, saying that it would be "clear and direct in text with close to half of the present law, in terms of both chapters and words."

She said that the new bill would be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.

Union finance minister Nirmala Sitharaman had announced a revised tax structure under the new tax regime last year.

The revised structure was:

₹0 to ₹4 lakh: Nil

₹4 to ₹8 lakh: 5%

₹8 to ₹12 lakh: 10%

₹12 to ₹16 lakh: 15%

₹16 to ₹20 lakh: 20%

₹20 to ₹24 lakh: 25%

Above 24 lakh: 30%

Finance minister Nirmala Sitharaman announced a big relief for taxpayers during Union Budget 2025, informing that there will be zero income tax up to an annual income of ₹12 lakh. She also extended the time limit for filing updated returns for any assessment from two years to four years. Additionally, the annual limit for TDS on rent was also increased from ₹2 lakh to ₹6 lakh.

Finance minister Nirmala Sitharaman is set to present the Union Budget 2026 in the Parliament on Sunday, February 1, 2026. This will be her ninth straight budget presentation.

As every year, individuals are keenly watching the possible changes that might be introduced in income tax slabs or deductions.