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

Finance minister Nirmala Sitharaman proposed that the deadline to file I-T returns will be extended from December 31 to March 31, on payment of nominal fee.

Income Tax 2026: Presenting her ninth consecutive Union Budget in the Parliament on Sunday, finance minister Nirmala Sitharaman announced that the new Income Tax Act will come into effect from April 1, 2026. However, opposite to taxpayers' expectations, Sitharaman did not announce any changes to the income tax slabs this year.

Sitharaman also proposed that the deadline to file I-T returns will be extended from December 31 to March 31, on payment of nominal fee.

'The finance minister also proposed to reduce the TCS (Tax Collected at Source) rate from 5 per cent to 2 per cent for education and medical education under the liberalised remittance scheme.

Further, she stated that the TCS rate on the sale of overseas tour packages will also be cut to 2 per cent from 5 per cent. Earlier, the rate was 20 per cent.

Over the years, the income tax system has undergone significant changes. In the post-Independence era, income tax had 11 tax slabs, and currently, there are just seven tax slabs under the New Tax Regime, introduced in the Union Budget 2025.

Income Tax 2026 | Key highlights:

- New Income Tax Act, 2025, will come into effect from April 1, 2026, replacing the six-decade-old tax law.

- Deadline for filing of income tax (I-T) return revised from December 31 to March 31, on payment of nominal fee.

- Interest awarded by the Motor Accident Claims Tribunal to a natural person will be exempted from income tax, and any TDS on this will also be done away with.

- TCS rate on the sale of overseas tour programme package reduced from 5 per cent and 20 per cent to 2 per cent.

- TCS rate for education and medical purposes under the Liberalised Remittance Scheme (LRS) reduced from 5 per cent to 2 per cent.

- Seventeen drugs, including cancer medicines, to get cheaper. Sitharaman also proposed import duty exemption on drugs for 7 more rare diseases.

- TDS on the sale of immovable property by a non-resident is proposed to be deducted and deposited through the resident buyer's PAN-based challan instead of requiring TAN.

- A one-time six-month foreign asset disclosure scheme proposed for small taxpayers, like students and relocated NRIs, to disclose income or assets below a certain size.

No changes in Income Tax slabs 2026:

Tax slabs under new tax regime:

- ₹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%

Tax slabs under old tax regime:

- Up to ₹2.5 lakh: Nil

- ₹2.5 lakh to ₹5 lakh: 5%

- ₹5 lakh to ₹10 lakh: 20%

- Above ₹10 lakh: 30%

FAQ on Income Tax

- Difference between old and new tax 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.

- Which is better? Old tax regime or new tax regime: 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.

- Can taxpayers switch between old and new tax regime: 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.

- How to calculate income tax: Individuals can calculate their income tax using the Tax Calculator on the Income Tax Department's official website or at Hindustan Times.

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Feb 1, 2026, 14:14:26 IST

Income Tax Budget 2026 LIVE: Highway of opportunities, says PM Modi on Union Budget

Prime Minister Narendra Modi said that Union Budget 2026-27 is a "highway of opportunities".

Terming it as a "historic" budget, PM Modi said that it reflects the empowered presence of India's feminine strength.

The prime minister said that this year's Union Budget "is a foundation for our journey towards Viksit Bharat by 2047". He added that it also strengthens the foundation of India's bright future.

Feb 1, 2026, 13:32:20 IST

Income Tax Budget 2026 LIVE: What benefits NRIs and overseas residents have received?

Finance minister Nirmala Sitharaman announced the following exemptions for overseas residents and NRIs:

• Reduction of TCS rate on the sale of overseas tour program package from 5 per cent and 20 per cent to 2 per cent without any stipulation of amount.
• TDS on the sale of immovable property by a non-resident to be deducted and deposited through resident buyer's PAN-based challan instead of requiring TAN.
• One-time six-month foreign asset disclosure scheme announced for small taxpayers, including relocated NRIs, to disclose income or assets below a certain size.
• Immunity provided to non-disclosure of non-immovable foreign assets, with aggregate value less than ₹20 lakh, from prosecution with retrospective effect.
• Safe harbour provided to non-residents for component warehousing in a bonded warehouse at a profit margin of 2 per cent of the invoice value.
• Exemption from Minimum Alternate Tax (MAT) provided to all non-residents who pay tax on presumptive basis.

Feb 1, 2026, 12:35:13 IST

Income Tax Budget 2026 LIVE: No new changes in income tax slabs this year

While finance minister Nirmala Sitharaman proposed exemptions on duties for several goods, she did not introduce any new changes in income tax slabs for Union Budget 2026-27.

Feb 1, 2026, 12:07:15 IST

Income Tax Budget 2026 LIVE: FM proposes to increase ITR filing time from Dec 31 to March 31

Income Tax Budget 2026 LIVE: Finance minister Nirmala Sitharaman proposed to increase time limit for filing revised I-T return from December 31 to March 31, on payment of nominal fee.

Feb 1, 2026, 12:03:26 IST

Income Tax Budget 2026 LIVE: Interest awarded by motor accident claims tribunal to natural personal to be exempted

Finance minister Nirmala Sitharaman proposed that "any interest awarded by the motor accident claims tribunal to a natural person will be exempt from income tax and any TDS on this account will be done away with."

Feb 1, 2026, 11:59:23 IST

Income Tax Budget 2026 LIVE: FM proposes to reduce TCS rates for education, medical purposes

Income Tax Budget 2026 LIVE: Finance minister Nirmala Sitharaman proposed to reduce TCS rates for education and medical purposes from 5 per cent to 2 per cent.

Feb 1, 2026, 11:58:14 IST

Income Tax Budget 2026 LIVE: New Income tax act will come into effect from April 1, 2026, says FM

Income Tax Budget 2026 LIVE: Finance Minister Nirmala Sitharaman said that the new Income tax act will come into effect from April 1, 2026.