As the new financial year 2026-27 approaches, Indian taxpayers are gearing up for changes in income tax filing, set to take effect on April 1, 2026. These changes primarily involve the implementation of the new Income Tax Act, 2025 and revised Income-tax Rules, 2026, promising a simplified and more user-friendly experience. While the Union Budget 2026, presented by Finance Minister Nirmala Sitharaman on February 1st, 2026, did not introduce any modifications to the existing income tax slab structure for FY 2026-27, the new act and rules bring significant changes in terms of processes and compliance.

One of the most notable changes is the replacement of the Income Tax Act of 1961 with the new Income Tax Act, 2025. The new act aims to simplify the law, improve clarity, and make compliance easier for individuals and businesses. The government has been working towards modernizing the tax system to reflect the changing nature of income and technology-driven compliance.

Simplified Tax Forms and Easier Compliance

A key highlight of the new tax regime is the move toward simplified tax return forms. The government has indicated that the new forms will be shorter, more logical, and easier to fill, particularly for salaried individuals, pensioners, and small taxpayers. The intention is to reduce the dependency on professional help for basic filings. The draft Income-tax Rules, 2026 contains 333 rules and 190 forms, a significant reduction from the 511 rules and 399 forms in the Income-tax Rules, 1962. The new forms are designed in a smart way to provide for automated reconciliation and prefill capabilities, making filing more intuitive and less error-prone.

Key Changes and Continuations

• No Change in Tax Slabs: The income tax slabs and rates remain unchanged for FY 2026-27.
• Simplified Language: The new law uses simpler language with fewer sections, reduced from over 700 to 536, making it easier to understand.
• Streamlined TDS and TCS Rules: Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) rules have been streamlined, removing the need to navigate multiple provisions for similar transactions.
• Single 'Tax Year' Concept: The confusing "previous year" and "assessment year" terminology has been replaced with a single concept known as the "tax year," aligning income and taxation within the same time frame.
• Extended ITR Revision Window: The deadline to revise income tax returns has been extended from December 31 to March 31, providing three extra months to correct errors or update details.
• New Due Dates for ITR Filing: The government has revised due dates for filing Income Tax Returns (ITR) and extended the deadline for filing revised returns, with the aim of easing compliance and reducing peak-season congestion.

Old vs New Tax Regime

India continues to operate under a dual tax regime, allowing taxpayers to choose between the new tax regime (now the default option) and the old tax regime. The new regime offers lower income tax rates with limited deductions and exemptions, while the old regime has higher exemption limits.

• New Tax Regime Slabs (FY 2026-27/AY 2027-28):
  • Up to ₹4,00,000: Nil (0%)
  • ₹4,00,001 to ₹8,00,000: 5%
  • ₹8,00,001 to ₹12,00,000: 10%
  • ₹12,00,001 to ₹16,00,000: 15%
  • ₹16,00,001 to ₹20,00,000: 20%
  • ₹20,00,001 to ₹24,00,000: 25%
  • Above ₹24,00,000: 30%

Under the old tax regime, individual taxpayers pay no tax up to Rs 5 lakh. Under the new tax regime, taxpayers with an income limit of Rs 12 lakh are exempt from income tax. Additionally, salaried individuals get a standard deduction of Rs 50,000 in the old tax regime and Rs 75,000 in the new tax regime.

Other Key Updates

The Union Budget 2026 included other reforms such as the extension of the deadline for filing revised returns and the revision of the threshold for TDS. The budget proposals are classified under categories like Ease of Living, Rationalising penalty and prosecution, Supporting IT sector as India's growth engine, and Attracting global business and investment.

Feedback on Draft Rules

The Income Tax Department has released draft Income-tax Rules, 2026, and these were open for public feedback until February 22, 2026. This participative approach aims to refine the rules and forms, ensuring they are practical and effective. The government also launched two navigators providing the mapping of the old rules and the new draft rules and the mapping of the old forms and the new draft forms for guidance.