Budget 2026 has arrived with a mix of changes impacting salaried taxpayers, focusing on simplifying compliance and offering targeted relief rather than broad tax cuts. Here's a breakdown of what you need to know:

No Change in Income Tax Slabs

Contrary to expectations, Finance Minister Nirmala Sitharaman announced no revisions to the income tax slabs under either the old or the new tax regime. The government is continuing to promote the new tax regime as the default option.

The tax rates as per the new regime are: * Income up to ₹4 lakh: Nil * Income from ₹4 lakh to ₹8 lakh: 5% * Income from ₹8 lakh to ₹12 lakh: 10% * Income from ₹12 lakh to ₹16 lakh: 15% * Income from ₹16 lakh to ₹20 lakh: 20% * Income from ₹20 lakh to ₹24 lakh: 25% * Income above ₹24 lakh: 30%

Income Tax Act 2025

The new Income Tax Act, 2025, will come into effect on April 1, 2026. According to Finance Minister Nirmala Sitharaman, the new rules under the Income Tax Act, 2025 will be announced shortly. Tax forms have been redesigned to ensure easier compliance for citizens.

TCS Rate Reductions

The Budget 2026 proposes to reduce the Tax Collection at Source (TCS) rate on overseas tour program packages to 2%, a significant decrease from the previous rates of 5% and 20%. Similarly, TCS on education and medical remittances abroad will also drop from 5% to 2%. This measure aims to make overseas transactions more affordable and reflects a taxpayer-friendly approach. The government has unified TCS rates to a uniform 2% for transactions, including alcoholic liquor, scrap, minerals, and overseas tour packages. This simplification aims to reduce complexity and improve compliance.

Standard Deduction

The standard deduction of ₹75,000 for salaried employees continues in Budget 2026. This deduction reduces taxable income immediately, requires no paperwork or proof submission, and simplifies tax calculations.

Compliance and Litigation Relief

The deadline to revise income-tax returns has been extended from December 31 to March 31, subject to a nominal fee. Taxpayers will no longer face interest on penalty amounts during the appeal period, and prepayment requirements have been halved from 20% to 10%. Taxpayers can now update returns even after reassessment proceedings begin, with the updated return forming the basis of the assessment.

Mandatory TDS/TCS Deduction Rules

Budget 2026 mandates that income tax authorities and those responsible for deducting TDS or collecting TCS must follow CBDT guidelines. This move aims to prevent disputes and litigation by ensuring uniform application of rules and regulations. The amendment to Section 400(2) of the Act, effective April 1, 2026, restores the binding nature of these guidelines, offering legal protection and predictability.

Other Key Changes

• STT Hike: The budget has increased the Securities Transaction Tax (STT) on futures and options trades. The STT on futures increased from 0.02% to 0.05%, STT on options premium raised from 0.1% to 0.15%, and STT on exercise of options increased from 0.125% to 0.15%.
• Sovereign Gold Bonds (SGBs): Tax exemption on redemption of Sovereign Gold Bonds at maturity will continue only for bonds purchased from the primary market. For investors buying SGBs from the secondary market, the capital gains arising between purchase price and redemption value will now be taxable at maturity.
• Motor Accident Claims: Interest awarded by the Motor Accident Claims Tribunal will now be fully exempt from income tax, and TDS on such payouts will be removed.

While Budget 2026 may not offer direct income tax relief through changes in tax slabs, it focuses on easing compliance, reducing litigation, and providing targeted relief in specific areas. The introduction of the Income Tax Act 2025 and the rationalization of TCS rates are significant steps towards a simpler and more efficient tax system.