New Income Tax Slabs and Rates 2026 After Budget Presentation
Ahead of Budget 2026, the middle class anticipates a hike in the standard deduction to INR 1 lakh. Last year, FM Sitharaman made history by announcing zero tax for income up to INR 12 lakh under the New Regime. As the new Income Tax Act nears, taxpayers hope for further slab revisions and NPS benefits. Catch live news updates on the new Income Tax slabs and rates 2026 here.
In her record-setting ninth consecutive address on Sunday, February 1, 2026, Finance Minister Nirmala Sitharaman presented a INR 53.5 lakh crore Union Budget centered on the three "Kartavyas" (duties): sustaining economic growth, fulfilling citizen aspirations, and ensuring inclusive development. A major focus was the transition to the new Income Tax Act, 2025, which will replace the 1961 code starting April 1, 2026. While income tax slabs remained unchanged to ensure stability, the budget introduced simplified compliance through redesigned ITR forms and extended return revision deadlines.
For the middle class, significant relief came in the form of reduced Tax Collected at Source (TCS). Rates for overseas tour packages and remittances under the Liberalised Remittance Scheme (LRS) for education and medical purposes were slashed to a flat 2%. Additionally, life-saving healthcare became more affordable as the government exempted customs duty on 17 cancer drugs. However, to discourage speculative trading, the budget hiked the Securities Transaction Tax (STT) on futures to 0.05% and on options to 0.15%.
"I propose to extend time available for revising returns from 31st December to up to 31st March with the payment of a nominal fee. I also propose to stagger the timeline for filing of tax returns individuals with ITR-1 and ITR-2 will continue to file till 31st July," Sitharaman has announced in her budget 2026 speech.
To encourage more inflow into the Indian markets, Union Finance Minister Nirmala Sitharaman has proposed to increase the investment limit for individual Non-Resident Indians (NRIs) to 24% from the current 10%.
Union Finance Minister Nirmala Sitharaman has announced a new scheme for small taxpayers wherein a rule-based automated process will enable obtaining a lower or nil deduction certificate instead of filing an application with the assessing officer. She has also proposed to enable depositories to accept Form 15G or Form 15H from the investor and provide it directly to various relevant companies.
Nirmala Sitharaman has announced 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.
In her budget 2026 speech, Nirmala Sitharaman has announced TCS rates on sale of overseas tour programme package will be reduced from the current 5% and 20% to 2% without any stipulation of amount.
Under the New Tax Regime (FY 2025-26), the basic exemption limit stands at INR 4 lakh, with a progressive structure: 5% for INR 4-8 lakh, 10% for INR 8-12 lakh, 15% for INR 12-16 lakh, 20% for INR 16-20 lakh, 25% for INR 20-24 lakh, and 30% for income above INR 24 lakh. Notably, a tax rebate under Section 87A makes income up to INR 12 lakh effectively tax-free for residents, while salaried individuals enjoy a INR 75,000 standard deduction, pushing the zero-tax threshold to INR 12.75 lakh. In contrast, the Old Tax Regime maintains its traditional slabs (starting at INR 2.5 lakh for those under 60) and allows for various deductions like Section 80C and HRA, which are largely unavailable in the new system.
Finance Minister Nirmala Sitharaman has begun her speech in the Lok Sabha to present the Union Budget for the 2026-27 fiscal year. She will soon announce if the existing income tax slabs and rates will be revised. Stay here to catch live news updates on the new income tax slabs and rates for the 2026-27 fiscal year.
New Delhi, February 1: As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026-27 today, February 1, the salaried class and middle-income earners are looking for measures to offset inflationary pressures. This budget is particularly significant as it serves as the final roadmap before the new Income Tax Act, 2025, officially takes effect on April 1, 2026. Catch live news updates on the new Income Tax slabs and rates 2026 here.
In her previous budget presentation on February 1, 2025, Finance Minister Nirmala Sitharaman introduced a landmark reform for middle-class taxpayers. She announced that under the New Tax Regime, individuals with an annual income of up to INR 12 lakh would pay zero income tax.
This was achieved by significantly enhancing the tax rebate under Section 87A to INR 60,000. For salaried individuals, the effective tax-free threshold rose even higher to INR 12.75 lakh, factoring in the INR 75,000 standard deduction. This move aimed to boost household consumption by leaving more disposable income in the hands of nearly 35 million taxpayers. Income Tax Slabs and Rates: Know New vs Old Regime Ahead of Budget 2026.
Income Tax Key Expectation: Standard Deduction Hike
The most widely anticipated relief for salaried employees is a potential increase in the Standard Deduction. Currently set at INR 75,000 under the New Tax Regime (following a hike in 2024-25) and INR 50,000 in the Old Regime, there is a strong demand to raise this limit to INR 1,00,000.
Industry analysts suggest that such a move would provide more disposable income to the middle class without requiring a complete overhaul of the tax slabs, which were already significantly revised in the previous fiscal year. Budget 2026: Live News Updates on Nirmala Sitharaman Speech.
Potential Income Tax Slab Adjustments and 87A Rebate
While major changes to the tax brackets are considered unlikely, there is speculation regarding the 30% tax slab. Currently, the highest tax rate kicks in at an income of INR 24 lakh under the New Regime. Taxpayers have urged the government to move this threshold to INR 30 lakh or higher.
Additionally, experts are watching for updates to Section 87A. Under current rules, an individual earning up to INR 12 lakh pays zero tax due to a rebate of INR 60,000. There are hopes that this "zero-tax" threshold could be extended further or that the rebate could be adjusted to prevent a "cliff effect" for those earning just above the limit.
Focus on Savings and Housing
Beyond slabs, the "wishlist" for Budget 2026 includes:
Section 80C: A long-standing demand to increase the limit from INR 1.5 lakh to INR 2.5 lakh or INR 3 lakh under the Old Regime.
National Pension System (NPS): Hopes for an additional INR 50,000 deduction to be explicitly allowed under the New Regime to boost retirement savings.
Home Loans: Real estate experts are looking for a hike in the interest deduction limit on self-occupied property (Section 24b) from the current INR 2 lakh to INR 3 lakh or more.
Current Income Tax Slabs (FY 2025-26/AY 2026-27)
Before any potential changes are announced today, here is the current tax structure that remains the baseline for today's speech:
Income Range
New Regime Rate
Old Regime Rate
Up to INR 2,50,000
Nil
Nil
INR 2,50,001 – INR 4,00,000
Nil
5%
INR 4,00,001 – INR 5,00,000
5%
5%
INR 5,00,001 – INR 8,00,000
5%
20%
INR 8,00,001 – INR 10,00,000
10%
20%
INR 10,00,001 – INR 12,00,000
10%
30%
INR 12,00,001 – INR 16,00,000
15%
30%
INR 16,00,001 – INR 20,00,000
20%
30%
INR 20,00,001 – INR 24,00,000
25%
30%
Above INR 24,00,000
30%
30%
Under the New Regime, a full rebate is available for income up to INR 12 lakh, resulting in zero tax. With the standard deduction of INR 75,000, the effective tax-free limit for salaried individuals is INR 12.75 lakh.
Transitioning to the New Income Tax Act
A major technical highlight of today's speech will be the transition provisions for the Income Tax Act, 2025. The government aims to simplify the code by reducing the number of sections and word count, making compliance more "intuitive." Taxpayers are hoping for clarity on how existing exemptions and litigations will be handled during this massive legislative shift.
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(The above story first appeared on LatestLY on Feb 01, 2026 11:02 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).