Budget 2026 Income Tax Slab Rates: How Much Tax You’ll Pay This Year – Explained

Synopsis: This article discusses the absence of changes in the income tax brackets and rates, along with the top 10 announcements made by the government regarding the new income tax.

At 11 am, February 1, 2026, TV screens across the nation lit up. Salaried workers paused their spreadsheets, small business owners turned up the volume, and young taxpayers listened with cautious optimism. It was the day the Union Budget 2026 was finally presented in the Parliament.  

Speculations filled the air: Will the government lighten the tax load of the middle class? Will there be new income tax slabs or higher exemptions to battle the rising living costs? Will the salaried employees be blessed with a higher standard deduction? Ultimately, every taxpayer had one question: Will I pay less tax this year?

The Big Reveal

Clearing all the speculations and rumours, the Budget 2026 came out with no changes in the income tax. There were no revisions to the tax brackets or rates. At first glance, this is disheartening for the common man. 

New Income Tax Slabs for FY 2026-27

For a salaried employee earning over 24 lakhs a year, the unchanged tax slab offers little relief. According to the new tax regime, the tax payable would be 3.4 lakh a year after cess.

Despite inflation and rising living costs, high-income earners will continue to pay a meaningful part of their salary to taxes due to the absence of upward revision in tax slabs after 24 lakhs.

Also read: Share Buyback Tax Rules Changed in Budget 2026: How Much Tax Will Investors Pay Now?

Top 10 Income Tax announcements in Budget 2026

1. Income Tax Act, 2025, to roll out from April 1

• The Income Tax Act of 1961 will now be replaced by the new Income Tax Act, 2025, which will be effective from April 1, 2026. The government says the new Act is in simpler language, more streamlined and less complex.

2. 200% penalty for misreporting of income

• Genuine mistakes will be fined lightly, but intentional misreporting will face high penalties up to 200% of the tax amount.

3. Simplified ITR forms to be notified shortly

• Under the new Act, new tax return forms will be released soon with clearer instructions and layouts to help first-time as well as regular tax filers navigate.

4. Revised ITR filing deadline extended to March 31

• The deadline to file revised ITRs has been extended until March 31 from December 31 upon paying a nominal fee.

5. TDS refund allowed even after the ITR deadline

• Under the new law, taxpayers can claim TDS refunds even if they file ITRs after the original due date.

6. No interest on the penalty amount during the appeal period

• No penalty will be charged on taxpayers while their cash is under appeal. This is to ease financial stress.

7. Six-month foreign asset disclosure scheme 

• A six-month window was introduced for small taxpayers such as students, young professionls and recently relocated NRIs to disclose their overseas income or assets without penalties.

8. MAT exemption for certain non-residents; rate cut proposed

• For some non-resident taxpayers, the Minimum Alternate Tax or MAT regime is restructured and treated as the final tax. The rate cut proposed is from 15% to 14%.

9. Key tax exemptions and TCS relief

• Motor Accident Claims Tribunal awards are exempt from income tax
• TCS under LRS for education and medical purposes has been cut from 5% to 2%
• TCS on overseas tour packages reduced from 5% and 20% to 2%

10. Higher taxes for market transactions and buybacks

• STT on options has been increased from 0.1% to 0.15% 
• STT on futures increased  from 0.02% to 0.05% 
• Buyback proceeds will be taxed as capital gains for all shareholders.

Conclusion

The Union Budget 2026 has been less about dramatic changes and more about strengthening compliance and simplifying processes. The government’s focus on this budget is not on providing broad tax benefits but on improving government revenue through ease of compliance in order to strengthen the fiscal position of the nation. 

Written by Nila Maria Jacob