New Income Tax Slabs and Rates for FY 2026-27: How Budget Affects Your Take-Home Salary
In Budget 2026, Nirmala Sitharaman focused on stability, maintaining current tax slabs while slashing TCS on foreign travel to 2%. Key highlights include a 4.3% fiscal deficit target and the transition to the New Income Tax Act on April 1. Investors saw a hike in STT on futures, while the middle class continues to enjoy zero tax up to INR 12.75 lakh.
New Delhi, February 1: In her historic ninth consecutive Budget presentation today, February 1, Finance Minister Nirmala Sitharaman opted for stability over radical change, proposing no new changes to the personal income tax slabs or rates for the 2026-27 financial year. Coming on the heels of the massive tax reforms announced in 2025, Sitharaman focused her speech on the upcoming implementation of the new Income Tax Act, 2025, and introduced targeted reliefs for foreign travel, medical expenses, and small-scale investors.
The Finance Minister confirmed that the Income Tax Act, 2025, will officially come into effect on April 1, 2026. The government intends to notify simplified tax rules and redesigned ITR forms shortly to ensure a smooth transition for taxpayers. Income Tax Slabs and Rates: Know New vs Old Regime Ahead of Budget 2026.
Key direct tax highlights from today's speech include:
- TCS Relief: The Tax Collected at Source (TCS) on overseas tour packages has been slashed to 2% (down from 5% and 20%). Similarly, remittances for education and medical purposes see a reduction to 2%.
- Stock Market Adjustments: To curb speculative trading, the Securities Transaction Tax (STT) on futures has been raised to 0.05%, while the tax on options premiums has increased to 0.15%.
- Revised Return Deadline: The window for filing revised income tax returns has been extended to March 31 (from December 31) with a nominal fee.
New vs. Old Income Tax Slabs and Rates (FY 2026-27)
While the industry hoped for a hike in the standard deduction to INR 1 lakh, it remains at INR 75,000 for the New Regime. Below are the current income tax rates that continue to apply:
| 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% |
Thanks to the rebate under Section 87A introduced in the previous year, individuals earning up to INR 12 lakh effectively pay zero tax. For salaried employees, the effective tax-free limit is INR 12.75 lakh.
Indirect Tax: Health and Manufacturing Push
In the realm of indirect taxes, the Finance Minister moved to make critical healthcare more affordable while protecting domestic manufacturing under the "Make in India" initiative. Budget 2026: Live News Updates on Nirmala Sitharaman Speech.
Major indirect tax announcements include:
- Cancer Relief: Basic Customs Duty (BCD) has been fully exempted on 17 life-saving drugs used for cancer treatment.
- Customs Rationalization: The government has removed customs duty exemptions on several items that are now being manufactured competitively within India.
- Aviation and Seafood: To boost exports, the duty-free import limit for seafood processing inputs was raised to 3%. In aviation, BCD was exempted for components required to manufacture civilian training aircraft.
Strategic Economic Outlook
Beyond taxes, Sitharaman projected a fiscal deficit of 4.3% for FY27 and increased the capital expenditure target to INR 12.2 lakh crore. The budget also introduced "Bharat Vistar," an AI-driven multilingual tool to assist farmers, and set plans for three dedicated chemical parks in every state.
As the nation moves toward the "Vikasit Bharat" vision, this budget serves as a bridge between the old legislative framework and a simplified, digital-first tax era starting this April.
(The above story first appeared on LatestLY on Feb 01, 2026 12:49 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).