Income Tax Budget 2026 highlights: Does Budget 2026 impact tax slabs, what are new rules?

Income Tax Budget 2026 LIVE Updates: Here are key highlights to this blog:

• Finance minister Nirmala Sitharaman on Sunday, during the presentation of Union Budget 2026-27, announced that the New Income Tax Act, 2025, will come into effect from April 1, 2026, replacing the six-decade-old tax law.
• Besides announcing the new act, the finance minister also extended the deadline for filing I-T returns from December 31 to March 31.
• However, no changes were introduced in the tax structure or slabs in this year's budget.
• The Income Tax Act, 2025, is revenue-neutral and introduces no change in the tax slab rates. It simplifies direct taxes, removing ambiguities and thus reducing the scope of legal actions.
• The new act also has a streamlined tax structure, with the total number of sections reduced from 819 to 536, the total number of chapters cut from 47 to 23, 16 schedules included, and new tools -- tables and formulas -- introduced for clarity and ease of interpretation.

The government will soon notify new rules under the Income Tax Act, 2025. Speaking on direct taxes, the Finance Minister said the new law will come into force from 1 April. Updated tax rules and income tax return forms will be released shortly. She also clarified that there are no changes to income tax rates, standard deduction, or tax slabs under the new tax regime.

Income Tax Budget 2026 LIVE Updates: The Income Tax Act, 2025, is revenue-neutral and introduces no change in the tax slab rates. It simplifies direct taxes, removing ambiguities and thus reducing the scope of legal actions.

The new act also has a streamlined tax structure, with the total number of sections reduced from 819 to 536, the total number of chapters cut from 47 to 23, 16 schedules included, and new tools -- tables and formulas -- introduced for clarity and ease of interpretation.

Income Tax Budget 2026 LIVE Updates: According to the Central Board of Direct Taxes (CBDT), a “buy-back” means the purchase by a company of its own shares in accordance with the provisions of company law.

In simple terms, a buyback is when a company offers to purchase its own shares from shareholders and then cancels those shares. This reduces the total number of shares in the market, which can increase earnings per share and the promoter’s stake in the company.

Income Tax Budget 2026 LIVE Updates: The Income Tax department on Saturday clarified how the taxation of share buybacks has changed following announcements made in the Union Budget 2026, explaining that the revised framework will largely benefit small and retail shareholders.

The clarification came after finance minister Nirmala Sitharaman proposed shifting buyback taxation back to a capital gains framework, reversing the dividend-based taxation system that came into effect in October 2024.

Income Tax Budget 2026 LIVE Updates: Under the new system, buyback gains will be taxed like normal capital gains. The I-T department said, “Shareholders other than promoters will pay tax on such gains at the applicable capital gains tax rate. That is 12.5% for long term capital gains, listed and unlisted. 20% on short term listed, and applicable rate on short term unlisted.”

The calculation will be simple:

Buyback price – Cost of acquisition = Capital gains

For example, if a shareholder bought a share for ₹100 and sold it in a buyback for ₹150, the taxable gain will be ₹50.

If the share was held for more than 12 months, the gain will be taxed at 12.5% (long-term capital gains).

If held for less than 12 months, it will be taxed at 20% (short-term capital gains).

This is lower than dividend taxation, which could go up to 30% depending on the income slab.

Income Tax Budget 2026 LIVE Updates: Until now, buyback proceeds were taxed as dividend income. This meant shareholders paid tax as per their income tax slabs, which could go up to 30%.

In her Budget 2026 speech, Sitharaman announced that buyback taxation would move back to the capital gains system.

“A buyback was presently taxed as dividend but extinguishment of share was treated as capital loss. This posed problems to small shareholders who had no capital gains to offset the loss,” the Income Tax Department said. “Also, a buyback conceptually is in nature of capital gains.”

Income Tax Budget 2026 LIVE Updates: According to the Central Board of Direct Taxes (CBDT), a “buy-back” means the purchase by a company of its own shares in accordance with the provisions of company law.

In simple terms, a buyback is when a company offers to purchase its own shares from shareholders and then cancels those shares. This reduces the total number of shares in the market, which can increase earnings per share and the promoter’s stake in the company.

“I propose 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,”Nirmala Sitharaman on income tax.

In the new tax regime, the Union Budget 2025 revised tax rate structure to:

0-4 lakh rupees - Nil

4-8 lakh rupees - 5 percent

8-12 lakh rupees - 10 percent

12-16 lakh rupees - 15 percent

16-20 lakh rupees - 20 percent

20- 24 lakh rupees - 25 percent

Above 24 lakh rupees - 30 percent

Income Tax Budget 2026 LIVE Updates: The streamlined and modernised framework of the new Act further simplifies the technicalities by replacing the confusing terms 'assessment year' and 'previous year' with just one term -- 'Tax Year'.

According to the new Act, "tax year" means the 12-month period of the financial year commencing on April 1. In case of a business or profession newly set up, or a source of income that has newly come into existence in any financial year, the tax year shall be the period beginning with: a) the date of setting up of such business or profession; or b) the date on which such source of income newly comes into existence, and ending with the said financial year.

The Income Tax Act, 2025, also enables the central government to design new schemes aimed at improving efficiency, transparency and accountability in tax administration.

Compliance has been further simplified in this act, with Tax Deducted at Source (TDS)-related provisions, earlier spanning across multiple sections, have now been streamlined and grouped under a single section - Section 393.

The act allows taxpayers to claim TDS refund even when I-T returns are filed after deadlines, without any penal charges.

The new Act also aims for digital-first enforcement, where the virtual digital space is defined as an environment, area, or realm constructed and experienced through computer technology.

And lastly, the new Income Tax Act, 2025, also introduces a vigorous and taxpayer-friendly framework for resolving disputes.

Income Tax Budget 2026 LIVE Updates:
1. Simplification: Replace obsolete language and redundant provisions with clear, concise, and modern legal text.

2. Digital interpretation: Allow faceless assessments and digital compliance to reduce corruption and human interface.

3. Taxpayer-centric approach: Enhance transparency, improve ease of filing and reduce litigation.

4. Global alignment: Reflect contemporary economic realities, including taxation of digital assets and global income.

Income Tax Budget 2026 LIVE Updates: The Income Tax Act, 2025, is revenue-neutral and introduces no change in the tax slab rates. It simplifies direct taxes, removing ambiguities and thus reducing the scope of legal actions. The new act also has a streamlined tax structure, with the total number of sections reduced from 819 to 536, the total number of chapters cut from 47 to 23, 16 schedules included, and new tools -- tables and formulas -- introduced for clarity and ease of interpretation.

Income Tax Budget 2026 LIVE Updates: A list of items expected to get costlier:

• Alcohol
• Cigarettes
• Nuclear Power Projects components
• Minerals, iron ore, coal
• Misreporting of income tax
• Stock options and future trading