FM Sitharaman lists ‘three Kartavyas’
This is the first budget prepared in Kartavya Bhavan, inspired by three Kartavyas:
- Accelerate and sustain economic growth by enhancing productivity, competitiveness, and resilience amid global volatility.
- Fulfil the aspirations of the people and build their capacity, making them active partners in India’s path to prosperity.
- Ensure inclusive development aligned with ‘Sabka Saath, Sabka Vikas’, giving every family, community, region, and sector access to resources, amenities, and opportunities.
Income Tax 2026 Highlights
Finance Minister Nirmala Sitharaman, presenting her ninth consecutive Union Budget on Sunday, announced that the new Income Tax Act will come into effect from April 1, 2026, replacing the six-decade-old tax law. Despite expectations, there are no changes to income tax slabs this year.
Key Changes Announced
- Filing deadline extended: The deadline to file income tax returns is now March 31, instead of December 31, subject to a nominal fee.
- TCS reductions: Tax Collected at Source (TCS) for education and medical education under the Liberalised Remittance Scheme has been reduced from 5% to 2%. TCS on overseas tour packages has been cut to 2%, down from 5% (previously 20%).
- Exemptions: Interest awarded by Motor Accident Claims Tribunal to individuals will be tax-free, and TDS on this will be removed.
- Healthcare support: Seventeen essential drugs, including cancer medications, will be made cheaper. Import duty exemptions are proposed for drugs treating seven rare diseases.
- Property transactions: TDS on immovable property sales by non-residents will now be deducted through the resident buyer’s PAN-based challan, removing the need for a TAN.
- Foreign assets: A six-month disclosure window is proposed for small taxpayers, such as students or relocated NRIs, to report minor foreign income or assets.
Income Tax Slabs 2026
New Tax Regime:
- ₹0–4 lakh: Nil
- ₹4–8 lakh: 5%
- ₹8–12 lakh: 10%
- ₹12–16 lakh: 15%
- ₹16–20 lakh: 20%
- ₹20–24 lakh: 25%
- Above ₹24 lakh: 30%
Old Tax Regime:
- Up to ₹2.5 lakh: Nil
- ₹2.5–5 lakh: 5%
- ₹5–10 lakh: 20%
- Above ₹10 lakh: 30%
Rebate and Deductions
- New regime: Rebate up to ₹60,000 for income up to ₹12 lakh. Standard deduction of ₹75,000 for salaried individuals.
- Old regime: Rebate up to ₹12,500. Standard deduction ₹50,000. Various deductions allowed under Sections 80C, 80D, HRA, LTA, etc.
Choosing the Right Regime
- New regime: Best for middle-income earners with few or no deductions. Offers relaxed slab rates but limited exemptions.
- Old regime: Better for taxpayers with significant deductions and exemptions, such as HRA, home loan interest, or 80C claims.
Switching Regimes
- Salaried individuals can switch annually.
- Taxpayers with business income can switch once between old and new regimes.
Tax Planning Examples FY 2025-26
- Income ≤ ₹12 lakh: Usually tax-free under the new regime due to rebate and standard deduction.
- Income with high deductions: Old regime may result in lower tax liability, as demonstrated in case studies.
Surcharge and Cess
- Surcharge: Applies to income above ₹50 lakh; varies between 5%–25% in new regime, up to 37% in old regime for highest earners.
- Cess: Health and Education cess of 4% applies in all cases.
Bottom Line
The choice between the old and new tax regime depends on your income, deductions, and exemptions. Planning at the start of the financial year ensures lower TDS, higher take-home pay, and optimal tax savings.
