Income Tax Budget 2026 Live updates: What relief did taxpayers get this year? How middle class and salaried will benefit

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Sandeep Chaudhary, CEO of PeopleStrong feels that Budget 2026, “marks a meaningful shift towards a more progressive, transparent, and digital tax ecosystem”.

“The new Income Tax Act, 2025, starting from April 1, 2026, updates an old system and focuses on ease and predictability. For organizations, it streamlines payroll operations, reduces complexity, and strengthens compliance,” Chaudhary added.

• Budget 2026 made no new changes in income tax slabs, nor did it make any tweak to the new tax regime.
• However, during her speech, FM Sitharaman said that the Income Tax Act, 2025, which is slated to come into force on 1 April, will be announced shortly.
• One of the most significant tax decisions affecting investors is the hike in STT on F&O transactions.
• Taxpayers also got relief with the announcement that revised ITRs can now be filed till 31 March instead of 31 December with a nominal fee.

Samir Shah, Audit Leader at Deloitte Haskins & Sells, said that aligning the Income Computation and Disclosure Standards (ICDS) with the Indian Accounting Standards (Ind AS) is India's progressive step towards a coherent financial reporting framework.

“Aligning ICDS with Ind AS is a progressive step towards a single, coherent financial reporting framework. It reduces complexity for businesses, enhances comparability, and reinforces India’s commitment to globally aligned accounting standards, while also improving the quality and transparency of tax reporting,” said Shah.

• Imported goods for personal use — Proposed to reduce the tariff rate on all dutiable imported goods for personal use to 10%, compared to 20% existing.
• 17 cancer drugs — Proposed to exempt customs duty on 17 medicines used for cancer treatment.
• Drugs, Medicines and Food — Proposed to exempt customs duty on drugs, medicines, and food for the treatment under Special Medical Purposes for 7 rare diseases.
• Footwear (Shoes) — Proposed to allow duty-free imports, exports of leather or synthetic footwear, and shoe uppers.
• Textile garments — Budget proposed to extend the time period of exports of final product from 6 months to 1-year period, for leather and textile garments exporters.
• Seafood products — Proposed to increase the limit for duty-free imports of inputs used for processing seafood products for export to 3%, compared to 1% of the free-on-board value of the previous year.
• Overseas Tour Package — Proposed to reduce the TCS rate on the sale of overseas tour program packages to 2%, compared to their current 5% and 20% levels.
• Lithium-Ion batteries — Proposed to extend the customs duty exemption on capital goods used for manufacturing Lithium-Ion cells for batteries.
• Solar Panels — Proposed to exempt customs duty on the import of sodium antimonate for use in the manufacture of solar glass, used in solar panels.
• Critical minerals — Proposed to provide customs exemption on capital goods required for the processing of critical minerals in India.
• Biogas-blended CNG — Proposed to exclude customs exemption on the entire value of biogas while calculating the Central Excise duty payable on biogas blended CNG.
• Aircraft manufacturing components — Budget proposed to exempt basic customs duty on components and parts required for the manufacture of civilian, training and other aircraft.
• Microwave oven — Proposed to exempt customs duty on parts used in microwave oven manufacturing.
• Foreign Education — Proposed to TCS rate for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) to 2% from the existing 5% levels.

Finance Minister Nirmala Sitharaman during her Union Budget 2026 speech proposed a framework for the penalty for misreporting income tax to be 100% of the tax amount as an additional income tax over and above the tax and interest due.

• Tobacco products: Rates for chewing tobacco and jarda scented tobacco have been raised to 60%, compared to their existing 25% levels.
• Alcohol: TCS rate on Alcohol for human consumption has been increased to 2%, compared to 1% existing levels.
• Nuclear components: Proposed to extend the customs duty exemption on imports of goods for Nuclear Power Projects till the year 2035.
• Sale of minerals like coal/ lignite/ iron ore: Proposed to increase TCS rate to 2%, compared to the existing 1% levels.

Union Finance Minister Nirmala Sitharaman, in her Budget 2026 speech, proposed to reduce the TCS rate on the sale of overseas tour program packages to 2%, compared to their current 5% and 20% levels.

This move is set to make the foreign tour packages cheaper for travellers who are paying money up front.

Finance Minister Nirmala Sitharaman, during her Budget 2026 speech, proposed a six-month foreign asset disclosure scheme, which is targeted towards small taxpayers such as students, technology professionals and relocated non-resident Indians (NRIs).

As per the announcement, the move is to position small taxpayers to obtain lower or nil tax deduction certificates without the need for discretionary approvals from tax officials, marking a shift towards greater automation and predictability in tax administration.

Union Finance Minister Nirmala Sitharaman on Sunday, 1 February 2026, did not announce any new change in the tax slabs under the old or new income tax regime, bringing forth an underwhelming response from people who were expecting any form of tax relief in the rates.

Check out the tax slabs under the old tax regime —

• For income up to ₹2,50,000 — Nil
• For income of ₹2,50,001 to ₹5,00,000 — 5%
• For income of ₹5,00,001 to ₹10,00,000 — 20%
• For income above ₹10,00,000 — 30%

Under the new tax regime, the tax liability rates are as follows —

• For income of up to ₹4 lakh — Nil
• For income of ₹4 lakh to ₹8 lakh — 5%
• For income of ₹8 lakh to ₹12 lakh — 10%
• For income of ₹12 lakh to ₹16 lakh — 15%
• For income of ₹16 lakh to ₹20 lakh — 20%
• For income of ₹20 lakh to ₹24 lakh — 25%
• For income above ₹24 lakh — 30%

Finance Minister Nirmala Sitharaman on Monday, 2 February 2026, told the news agency PTI that the increase in the Security Transaction Tax (STT) is a sort of deterrence so that people do not go headlong in speculative derivative trading.

Union Budget proposed cuts on the TCS rate on travel, which is set to benefit the travellers as they will not have to pay a higher amount upfront. The 2% TCS cut is beneficial when a large amount of payment is involved.

“With this, the lower amount stands to get blocked for the taxpayers. This move will be beneficial not only for the taxpayers but also for the income tax department,” said CA Chirag Chauhan, founder of Mumbai-based CA Chauhan & Company.

FM Nirmala Sitharaman, in her Budget 2026 speech, proposed that the proceeds which an investor earns from the buyback of shares will also be subject to a capital gains tax.

The existing rules suggest that the proceeds gained from a buyback move are treated as a dividend and taxed based on the investor’s income tax slab rate.

However, this new norm will change that increasing a tax liability of an investor participating in a buyback offer.

Union Finance Minister Nirmala Sitharaman said that the government is set to notify the people about the new taxation rules under the Income Tax Act, 2025, which is set to be effective 1 April 2026.

However, it was also mentioned that there are no changes to income tax rates, the standard deduction, or tax slabs under the new tax regime.

Union Finance Minister Nirmala Sitharaman in her Budget 2026 speech proposed that the taxpayers will now be able to file their income tax returns (ITRs) till 31 March of the relevant assessment year, compared to its 31 December deadline as per the current norms.

Finance Minister Nirmala Sitharaman proposed to increase the Security Transaction Tax (STT) for F&O trading in an effort to encourage long-term investment in the economy.

“Further clarity through higher STT on futures and options aims to encourage longer-term investing, while higher NRI investment limits from 5% to 10% per stock and 24% at the overall level are intended to attract greater NRI participation,” says Srikanth Subramanian, co-founder and CEO of Ionic Wealth.

The Indian government's Budget proposal to increase the Security Transaction Tax (STT) means that the investors who are trading or looking to trade in the futures & options (F&O) derivatives market will have to pay more tax to the government per transaction.

FM Nirmala Sitharaman in the Union Budget 2026 announced that STT on futures will be hiked to 0.05% from 0.02% existing levels, and STT on options trading will be increased to 0.15% from 0.1% level.

STT is a direct tax which the government imposes on every purchase and sale of securities like equity shares, futures, and options on recognised stock exchanges.

Giving the government's rationale behind the STT increase, the tax department said that the total volume of transaction in the F&O segment is a massive 500 times of the Indian GDP, which stands at ₹300 lakh crore.

Issuing a clarification, the income tax department said STT has been raised only on options and futures, and not other segments.

The FM proposed to stagger the timeline for filing of tax returns. Individuals with ITR 1 and ITR 2 returns will continue to file till 31 July, and non-audit business cases or trusts will be allowed time till 31 August.

The Budget also proposed to extend the existing framework for immunity from penalty and prosecution in cases of underreporting to misreporting.

However, in such a case, the taxpayer will need to pay 100 per cent of the tax amount as an additional income tax over and above the tax and interest due.

Budget 2026 also makes a proposal for a scheme for small taxpayers wherein a rule-based automated process will enable obtaining a lower or nil deduction certificate instead of filing an application with the assessing officer.

Emphasising the need to support critical infrastructure and boost investment in data centres, the FM proposes to provide a "tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India.

"It will, however, need to provide services to Indian customers through an Indian reseller entity," the FM added.

The Budget extended the time limit for filing returns by businesses or trusts that do not need to get their accounts audited by one month till August 31. However, individuals will continue to file ITR by July 31.

Although no change in income tax rates and slabs was announced in the 2026-27 Budget, Sitharaman proposed an amnesty scheme under which small taxpayers, like students and tech professionals, can declare undisclosed foreign income and assets by paying additional tax and fees, to skip prosecution.

The STT rate for futures now is 0.05% and for options is 0.15%. In her speech, FM Sitharaman said, “I propose to raise the STT on Futures to 0.05% from present 0.02% options premium and exercise of options are both proposed to be raised to 0.15% from the present rate of 0.1% and 0.125% respectively.”

The FM proposed raising the Securities Transaction Tax (STT) on both futures and options. For futures, she proposed raising the tax rate from 0.02% to 0.05%; for options, from 0.01% to 0.15%.

A New Income Tax Act will come into effect from 1 April, replacing the six-decade-old tax law.

Sitharaman said in her Budget speech, "This (direct tax code) was completed in record time, and the Income Tax Act 2025 will come into effect from 1 April 2026. The simplified income tax rules and forms will be notified shortly, giving adequate time to taxpayers to acquaint themselves with their requirements."

No new changes in income tax slabs were announced in Budget 2026. FM Nirmala Sitharaman also did not announce any income tax rate cuts.

Hello and welcome to Livemint's blog on Budget income tax decisions. Here is a comprehensive, minute-by-minute update of what changed in Budget 2026 for taxpayers, salaried, middle class and investors.

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