India Budget 2026: Income Tax Slabs Unchanged for FY27

India Budget 2026 Keeps Income Tax Slabs Unchanged, Offers Filing Relief

New Delhi In the Union Budget 2026-27 presented on February 1, 2026, Finance Minister Nirmala Sitharaman confirmed that income tax slabs and rates will remain unchanged for the financial year 2026-27, offering continuity and stability for individual taxpayers across India. This decision holds for both the new tax regime and the old tax regime, with the existing structure set to continue into the next fiscal year.

The announcement comes as part of Sitharaman’s ninth consecutive Union Budget, reflecting an emphasis on maintaining predictability in personal taxation after broader tax reforms in recent years. Despite expectations around potential rate changes or exemptions, the government opted to preserve the current slab structure while focusing on procedural reforms and relief measures for taxpayers.

Current Tax Slabs Under New and Old Regimes

Under the existing new tax regime, individuals are taxed progressively as follows, with higher thresholds opening up for zero tax and lower rates for mid-segment incomes:

• Up to ₹4 lakh — Nil
• ₹4 lakh to ₹8 lakh — 5 percent
• ₹8 lakh to ₹12 lakh — 10 percent
• ₹12 lakh to ₹16 lakh — 15 percent
• ₹16 lakh to ₹20 lakh — 20 percent
• ₹20 lakh to ₹24 lakh — 25 percent
• Above ₹24 lakh — 30 percent

For the old tax regime, which allows deductions and exemptions such as under Section 80C and House Rent Allowance, the structure remains:

• Up to ₹2.5 lakh — Nil
• ₹2.5 lakh to ₹5 lakh — 5 percent
• ₹5 lakh to ₹10 lakh — 20 percent
• Above ₹10 lakh — 30 percent

The coexistence of two regimes gives taxpayers flexibility. While the new regime simplifies taxes with lower rates and fewer exemptions, the old regime may still be beneficial for those claiming significant deductions.

Procedural Reforms and Relief Measures

Although the tax slabs themselves remain intact, the Budget 2026 introduced several procedural changes aimed at simplifying compliance and easing taxpayer burden:

• Extended ITR Deadline: The deadline to file revised Income Tax Returns (ITR) has been shifted to March 31 from December 31, with a nominal fee for late revisions, providing more time for corrections.
• Staggered Due Dates: Different filing timelines for various forms (ITR1, ITR2, non-audit business returns) are being introduced to spread compliance pressure across the calendar year.
• Rule-based Automated Certificates: Small taxpayers will benefit from an automated system that issues lower or nil deduction certificates without the need for manual applications, reducing red tape.

Other notable proposals include rationalizing Tax Collected at Source (TCS) on education and medical remittances abroad, and changes to rules on assessments and penalties aimed at creating a more taxpayer-friendly environment.

New Income Tax Act and Transition

The Budget reiterated that the new Income Tax Act, 2025 will come into effect from April 1, 2026, replacing the Indian Income Tax Act of 1961. This transition reflects a long-planned overhaul of the tax code focused on simplification and clarity. While tax slabs remain unchanged this year, the shift to the new law lays groundwork for future reforms in rates, deductions and administration.

What Taxpayers Should Consider

With the tax slabs unchanged, taxpayers must evaluate how the existing structures align with their financial situations:

• Salaried individuals should weigh standard deductions and exemptions under the old regime against the simpler, lower rate structure of the new regime.
• Families and investors may benefit from knowing the revised dates and compliance reliefs, especially amid larger financial planning decisions for the year.

Experts have noted that maintaining slab stability supports consumer confidence and avoids short-term disruptions in household finances, particularly in a year where broader economic pressures persist.

Broader Policy Context

The decision to hold tax slabs steady fits within the government’s broader fiscal policy strategy of encouraging growth while minimising shock from frequent rate changes. Analysts have pointed out that recent years saw major structural tax reforms, and this year’s budget reflects a cautious approach that prioritises continuity.

As India moves into the new fiscal year with these measures, taxpayers and financial planners will be watching how the new Income Tax Act’s implementation and procedural reforms shape the lived experience of the tax code.