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New Income Tax Act to come into effect from April 1, 2026: Nirmala Sitharaman
Budget 2026: Nirmala Sitharaman said new Income Tax Act which was notified in July 2025 will come into effect from April 1, 2026.
Finance minister Nirmala Sitharaman on Sunday presented the Union Budget 2026-27 in Parliament, unveiling the government's fiscal strategy for the coming year. Nirmala Sitharaman said new Income Tax Act, which was notified in July 2025, will come into effect from April 1, 2026.
A key focus of this year's Budget was personal income taxation, with announcements designed to address taxpayer expectations and support economic activity. Track Budget speech live updates here
The finance minister also proposed rule-based automated process for small taxpayers in the FY27 Budget.
The Budget 2026 focuses on three ‘kartavyas’ or duties, Nirmala Sitharaman began her speech by saying. The three kartavyas she said are: Accelerate and sustain economic growth along with building resilience to volatile global dynamics; fulfill spirations of our people and build their capacity; and ensure that every family, community, region and sector has access to resources, amenities and opportunities.
In last year's Union Budget (2025-26), the government significantly overhauled the personal income tax regime as part of its efforts to provide relief to the salaried class and boost disposable incomes.
The Budget 2025 saw income of up to ₹12 lakh (i.e. average income of ₹1 lakh per month other than special rate income such as capital gains) under the new regime going tax free.
This limit was ₹12.75 lakh for salaried tax payers, due to standard deduction of ₹75,000.
This was done in a bid to substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment under the new structure.
The Union Budget 2025 substantially broadened tax slabs under the new tax regime - such that up to ₹4 lakh of annual income was made tax-free, with the highest rate of 30 per cent only applying above ₹24 lakh.
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
The 2025 Budget also progressed structural tax reform with the introduction of a new Income Tax Bill aimed at simplifying and modernizing India's tax code, streamlining numerous sections of the 1961 Act.
