The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, 2026, focused heavily on structural overhauls and compliance simplification rather than drastic changes to personal income tax rates. The standout announcement was official implementation of Income Tax Act, 2025, which replaces decades-old 1961 Act starting April 1, 2026.
Here is a comprehensive breakdown of key tax changes and highlights.
1. Personal Income Tax: Stability
For the 2026-27 financial year, Finance Minister opted for continuity. There were no changes to existing income tax slabs under either New or Old tax regimes.
New Tax Regime Slabs (FY 2026-27)
New Tax Regime remains default option, offering lower rates for those who do not claim traditional deductions.
| Taxable Income (₹) | Tax Rate |
| Up to 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Key Benefits Retained:
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Zero Tax up to ₹12.75 Lakh: For salaried individuals, combination of the ₹75,000 Standard Deduction and Section 87A rebate (up to ₹60,000) effectively means no tax is paid on a gross salary up to ₹12.75 lakh.
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Marginal Relief: This continues to apply for those whose income slightly exceeds the ₹12 lakh threshold, ensuring tax increase isn’t higher than income increase.
2. Market and Investment Taxation
While slabs remained steady, Budget introduced several changes affecting investors and traders.
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Higher STT on Derivatives: To discourage speculative trading, Securities Transaction Tax (STT) on Futures was raised from 0.02% to 0.05%, while STT on Options (both premium and exercise) was increased to 0.15%.
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Sovereign Gold Bonds (SGBs): Tax exemptions on SGB redemptions at maturity are now restricted to bonds bought in primary market (direct government issuance). Gains from SGBs bought in secondary market will now be taxable.
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Share Buybacks: These will now be taxed as Capital Gains in hands of shareholders. To prevent tax arbitrage, promoters face effective tax rates of 22% (corporate) and 30% (non-corporate).
3. Simplified Compliance and Filing
The government introduced several citizen-friendly procedural changes to reduce litigation and ease filing process.
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Extended Deadlines: The window to file Revised Returns has been extended from December 31 to March 31 of assessment year (subject to a nominal fee).
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Staggered ITR Filing: While salaried individuals (ITR-1/2) still have a July 31 deadline, non-audit business cases and trusts now have until August 31.
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Automated NIL Deduction: Small taxpayers can now obtain lower or NIL TDS certificates through an automated, rule-based process, removing need to interact with a tax officer.
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Foreign Asset Disclosure: A one-time, six-month window was opened for small taxpayers (students, young professionals, NRIs) to disclose limited undisclosed foreign assets/income with immunity from prosecution.
4. Rationalization of TCS Rates
Multi-rate structure for Tax Collected at Source (TCS) was simplified to ease cash flow burden on individuals.
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Overseas Travel: TCS on overseas tour packages is now a flat 2%, removing previous 5%/20% threshold-based system.
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Education and Medical: Remittances under Liberalised Remittance Scheme (LRS) for education and medical purposes were reduced from 5% to 2%.
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Goods: TCS on scrap, minerals (coal, iron ore), and alcoholic liquor was standardized at 2%.
5. Corporate and Global Hub Reforms
To position India as a global financial and tech hub, Budget targeted specific growth sectors.
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MAT (Minimum Alternate Tax): Proposed to be reduced from 15% to 14% and will become a final tax with no new MAT credits allowed after April 1, 2026.
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IFSC Incentives: Units in International Financial Services Centre (IFSC) saw their tax holiday extended to 20 years, with a concessional 15% rate thereafter.
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Data Centers: Foreign companies providing cloud services through Indian data centers are granted a tax holiday until 2047.
Summary of Major Impacts
The 2026 Budget signals a shift from rate-chasing to system-building. By introducing new Income Tax Act and automating TDS/TCS processes, the government aims to create a more predictable and less adversarial tax environment.