In her presentation of the Union Budget 2026-27, Finance Minister Nirmala Sitharaman has chosen the path of fiscal continuity and has not changed the income tax slabs and basic exemption limits. After the massive change that took place in the budget of the previous year, in which the tax-free exemption limit was raised to ₹12.75 lakh (including standard deduction) under the New Tax Regime, the government has chosen to focus on stability to allow the previous changes to settle
Although the lack of new tax reliefs might mean that certain middle-class taxpayers want more, the Budget is more concerned with making compliance easier and lessening the burden on cash flow.
Current Tax Slabs for FY 2026-27 (Assessment Year 2027-28)
The New Tax Regime remains the default option, designed to offer lower rates in exchange for forgoing most exemptions.
| Income Slab | Tax Rate (New Regime) | Tax Rate (Old Regime) | |
| Up to ₹4,00,000 | Nil | Nil (up to ₹2.5L) | |
| ₹4,00,001 – ₹8,00,000 | 5% | 5% (up to ₹5L) | |
| ₹8,00,001 – ₹10,00,000 | 10% | 20% | |
| ₹10,00,001 – ₹12,00,000 | 10% | 30% | |
| ₹12,00,001 – ₹16,00,000 | 15% | 30% | |
| ₹16,00,001 – ₹20,00,000 | 20% | 30% | |
| ₹20,00,001 – ₹24,00,000 | 25% | 30% | |
| Above ₹24,00,000 | 30% | 30% |
Note: The Standard Deduction is the same at ₹75,000 under the New Regime and ₹50,000 under the Old Regime. Thanks to the Section 87A tax rebate, individuals with a total income of up to ₹12.75 lakh pay zero tax under the New Regime.
Beyond Slabs: Important Direct Tax Highlights
Although the tax brackets remain unchanged, the Finance Minister has brought in some changes to make life easier for taxpayers:
TCS Relief for Global Indians: The Tax Collected at Source (TCS) on foreign tour packages, medical bills, and educational expenses has been reduced from 5% (and 20% in certain instances) to a flat rate of 2%. This is a major reprieve for families with children studying abroad or for those planning to travel abroad.
Extended ITR Filing Date: In a major respite for taxpayers who often miss the deadline, the date to file the revised or late return has been extended to March 31st (from the earlier deadline of Dec 31st), for a nominal fee.
TDS Ease: Residents purchasing property from NRIs are now allowed to deduct TDS without requiring a TAN (Tax Deduction and Collection Account Number), making property transactions easier.
New Income Tax Act 2025: The FM has announced that the new, simplified Income Tax Act will come into force from April 1, 2026, promising a “more concise and lucid” law that is “better suited to the digital age.”
The Verdict: A “Quiet” Year for Taxpayers
According to economists, the “no-change” approach is a calculated move to ensure a steady flow of revenue as the government increases its capital spending to a record high of ₹12.2 lakh crore. The government’s plan is to create a stable atmosphere for consumption, both domestic and foreign, by not making constant changes to the taxation system.
