Budget 2026: Income tax slabs, rates for FY 2026-2027 — check how much tax you need to pay

Finance Minister Nirmala Sitharaman on Sunday announced during her Budget 2026 presentation that the Income Tax Act, 2025, will be implemented from 1 April 2026, and all rules and tax return forms will be notified later. The Income Tax Act, 2025 will replace the six-decade-old tax law and the changes made in tax laws in 2026-27 Budget will be incorporated in the new legislation.

The finance minister has not announced any change in income tax slabs for the coming year.

What are the current income tax slabs?

Last year, the finance minister had announced major tax reforms. However, this year, the government has kept the tax slabs unchanged. The existing tax slabs will continue to apply for FY2026-2027, which means that the government has not changed the income ranges and the taxes applied to them.

Also Read | Income tax changes in Budget 2026: What taxpayers need to know

Under the Old Regime, the income tax slabs remain at ₹2.5 lakh, ₹5 lakh, ₹10 lakh and above. The New Regime stretches the zero tax slab to ₹4 lakh and increases the tax rate to 30% for incomes above ₹24 lakh.

The government had also announced a tax rebate for incomes up to ₹12 lakh with standard deduction increased to ₹75,000, effectively making income up to ₹12.75 lakh tax-free for salaried individuals.

Other tax-linked announcements

The finance ministry also proposed to exempt interest earned on compensation awarded by the Motor Accident Claims Tribunal from income tax, FM Nirmala Sitharaman announced during her Budget 2026 presentation.

She said, “I propose that any interest awarded by the Motor Accident Claims Tribunal to a natural person will be exempt from Income Tax, and any TDS on this account will be done away with.”

The finance minister also proposed to reduce the Tax Collected at Source (TCS) rate on the sale of overseas tour programme packages from the current 5% and 20% to 2% without any stipulation of amount.

Also Read | A quick summary of Budget 2026: What matters and why

“I propose to reduce TCS rate for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) from 5 per cent to 2 per cent,” Nirmala Sitharaman announced.

For the taxpayers who hold securities in multiple companies, Nirmala Sitharaman has proposed to “enable depositories to accept Form 15G or Form 15H from the investor and provide it directly to various relevant companies.”

She further announced: “I propose to extend time available for revising returns from December 31 to up to March 31 with the payment of a nominal fee.”

“Individuals with ITR 1 and ITR 2 returns will continue to file till July 31 and non-audit business cases or trusts are proposed to be allowed time till August 31,” the minister announced, further adding that the the finance ministry proposes deduction in the TDS on the sale of immovable property by a non-resident and deposited through resident buyer’s PAN based challan instead of requiring TAN.

For students, young professionals and other small taxpayers, Nirmala Sitharaman proposed “to introduce a one-time 6-month foreign asset disclosure scheme" to disclose income or assets below a certain size.