Union Budget 2026: Income Tax Framework Remains Unchanged, Offering Stability but No Fresh Relief

Income tax once again took centre stage during the Union Budget 2026 presentation, as millions of taxpayers closely tracked announcements related to slabs, rates and exemptions. However, after Finance Minister Nirmala Sitharaman concluded her record ninth consecutive Budget speech, it became clear that the core income tax framework remained unchanged from the previous year, offering stability but no fresh slab-related relief. Introduced in 2020, the new income tax regime continues alongside the traditional old regime, leaving taxpayers with the familiar dilemma of choosing between lower tax rates with fewer exemptions or higher rates paired with generous deductions. Over the years, this choice has become increasingly nuanced, depending on income level and the extent of exemptions an individual can claim. Under the new tax regime for FY 2026–27, income up to Rs 4 lakh continues to be fully exempt from tax. Beyond this threshold, a progressive slab structure applies. Income between Rs 4 lakh and Rs 8 lakh is taxed at 5%, while earnings from Rs 8 lakh to Rs 12 lakh attract a 10% rate. Higher slabs rise gradually to 30% for income above Rs 24 lakh. A major relief introduced earlier continues this year as well. Resident individuals earning up to Rs 12 lakh are eligible for a full tax rebate, effectively bringing their tax liability to zero. For salaried taxpayers, this exemption threshold increases to Rs 12.75 lakh due to the standard deduction of Rs 75,000, making the new regime particularly attractive for middle-income earners with limited deductions. The old income tax regime, while unchanged, continues to appeal to taxpayers who make full use of exemptions and deductions. Under this structure, income up to Rs 2.5 lakh is exempt, followed by slab rates of 5%, 20% and 30%. Popular deductions such as House Rent Allowance, Leave Travel Allowance, Section 80C investments, medical insurance under Section 80D, NPS contributions and home loan interest remain available. Tax experts suggest that for individuals earning up to Rs 12 lakh, the new regime is clearly beneficial due to the zero-tax outcome. However, at higher income levels—especially above Rs 24 lakh—the decision depends on whether total exemptions and deductions exceed roughly Rs 8 lakh. If they do, the old regime may still result in lower tax outgo. While tax rates and slabs were left untouched, Budget 2026 introduced several compliance-related measures aimed at easing the burden on taxpayers. The deadline for filing revised income tax returns has been extended to March 31 from December 31, albeit with a nominal fee. Filing timelines were also rationalised, with ITR-1 and ITR-2 due by July 31, and non-audit business cases and trusts allowed until August 31. Additional relief includes full tax exemption on interest received from motor accident claims tribunals and reduced tax collection at source on overseas tour packages, education and medical expenses under the Liberalised Remittance Scheme. The New Income Tax Act, 2025, will come into effect from April 1, 2026, with simplified return forms expected soon. Despite these procedural tweaks, the income tax regime itself remains unchanged for the coming financial year.