The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, marks a transformative shift in India’s fiscal landscape. With the introduction of the Income Tax Act, 2025, the government is pivoting toward a “trust-based” taxation system, prioritizing ease of compliance and the reduction of legal friction over aggressive revenue extraction.Here is a comprehensive breakdown of the key changes, tax slabs, and new filing rules introduced in Budget 2026.Income Tax Act 2025: A New Era of SimplificationEffective from April 1, 2026, the new Act replaces the decades-old 1961 statute. The goal is to eliminate ambiguous interpretations and reduce the sheer number of sections to make the law more accessible to the common man.Unified Tax Year: The confusing distinction between “Assessment Year” and “Previous Year” is being phased out in favor of a single ‘Tax Year’.Redesigned ITR Forms: New forms with simplified layouts and plain language are expected soon, allowing most individuals to file without professional assistance.Updated Income Tax Slabs for FY 2026-27While the budget is revenue-neutral, the tax slabs under the New Tax Regime have been structured to provide maximum relief to middle-income earners.
New Tax Regime Slabs (Defaul
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Note: Under Section 87A, the rebate makes income up to ₹12 lakh tax-free for many. Salaried individuals also continue to benefit from a Standard Deduction of ₹75,000.
Key Changes in Tax Filing and Compliance.
The 2026 Budget introduces several “taxpayer-friendly” deadlines and correction windows to reduce penalties.
1. Extended Window for Revised Returns
The deadline for filing a Revised ITR (to correct errors) has been extended from December 31 to March 31 of the following tax year.Nominal Fee: A fee of ₹1,000 applies if income is below ₹5 lakh, and ₹5,000 for income above that.
2. Updated Returns (Even During Reassessment)
Taxpayers can now file an “Updated Return” even after reassessment proceedings have started, provided they pay an additional 10% tax. This is a major move to close disputes early.Loss Reduction: You can now use updated returns to reduce a previously claimed loss (e.g., changing a reported loss from ₹10 lakh to ₹8 lakh).
3. Staggered Filing Deadlines
To prevent portal crashes and last-minute rushes, the government has staggered the original filing dates:Individuals (ITR-1 & ITR-2): July 31.Non-audit Businesses & Trusts: August 31 (Extended from July 31).
Relief for Small Taxpayers and NRIs
Automated TDS Certificates: Small taxpayers can now apply for “Lower or Nil TDS” certificates through an electronic, rule-based system, removing the need for physical meetings with tax officers.
TCS Reductions: Tax Collected at Source (TCS) on overseas education and medical treatment has been slashed from 5% to 2%.
Foreign Asset Disclosure: A one-time, six-month window has been opened for small taxpayers (students, NRIs, etc.) to disclose foreign assets/income up to ₹1 crore without harsh penalties.
Expert Take: Ease vs. Cost
Experts like CA Ketan Vajani highlight that the 10% extra tax for updated returns is a fair trade-off to avoid lengthy litigation. Meanwhile, Gautam Nayak (CNK & Associates) points out that while some rates have nudged upward, the ability to “close the books” quickly provides much-needed peace of mind for the business community.
Would you like me to calculate your specific tax liability based on these new 2026 slabs, or help you understand which regime—Old or New—saves you more money?