Budget 2026 Live: All Eyes on Income Tax Slabs and Relief for Taxpayers
Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026-27 today, February 1, 2026, with the Budget speech commencing at 11:00 AM. This annual financial statement is keenly awaited by millions of income taxpayers across India, particularly the salaried class and middle-income earners, who are hoping for significant tax relief and revisions in the income tax structure.
Key Focus Areas: New vs. Old Tax Regimes
The spotlight is firmly on the income tax slabs for FY 2026-27, which will become effective from April 1, 2026. Taxpayers are eager to see if FM Sitharaman will announce major changes in:
- Income tax rates and slabs under both the new and old regimes
- Standard deduction limits
- Measures to make the new tax regime more attractive
The new income tax regime offers the benefit of lower tax rates, more rationalised slabs, and a higher standard deduction limit of Rs 75,000. However, it provides negligible deductions and exemptions. In contrast, the old income tax regime features higher tax rates at lower income levels, with the 30% slab kicking in at just Rs 10 lakh, but it allows popular deductions like Section 80C, Section 80D, and home loan interest benefits.
Current Tax Slabs and Potential Changes
Under the new tax regime for FY 2025-26, the tax slabs are as follows:
- Income up to Rs 4 lakh: Fully exempt
- Rs 4 lakh to Rs 8 lakh: Taxed at 5%
- Rs 8 lakh to Rs 12 lakh: Taxed at 10%
- Rs 12 lakh to Rs 16 lakh: Taxed at 15%
- Rs 16 lakh to Rs 20 lakh: Taxed at 20%
- Rs 20 lakh to Rs 24 lakh: Taxed at 25%
- Above Rs 24 lakh: Taxed at 30%
Many taxpayers are advocating for an increase in the basic exemption limit from Rs 4 lakh and pushing the 30% threshold to Rs 30 lakh to reduce the overall tax burden.
For the old tax regime, the current slabs (FY 2025-26) are:
- Up to Rs 2.5 lakh: No tax
- Rs 2.5 lakh to Rs 5 lakh: 5% tax
- Rs 5 lakh to Rs 10 lakh: 20% tax
- Above Rs 10 lakh: 30% tax
Expert Insights and Expectations
Tax experts highlight several areas where changes could be introduced to stimulate consumption and ease compliance:
Section 87A Rebate: Currently, income up to Rs 12-12.75 lakh is effectively tax-free for salaried individuals after this rebate. Experts suggest raising this threshold to Rs 15 lakh.
Standard Deduction: While the new regime offers Rs 75,000 and the old regime Rs 50,000, there is scope for further increases, especially in the new regime which lacks other deductions.
Home Loan Interest: Under the old regime, a deduction of up to Rs 2 lakh per year on interest for self-occupied property is available. Extending this to the new regime could boost the housing sector.
Section 80C: Its limit has remained at Rs 1.5 lakh for years. Experts recommend increasing this limit and making it available under the new regime to encourage savings.
Digital Infrastructure and Compliance
Surabhi Marwah, Tax Partner at EY India, emphasises that improving the e-filing experience through better digital infrastructure, data integration from banks and employers, and real-time tracking can streamline compliance and reduce taxpayer anxiety.
Nishant Kumar, Partner at Vialto Partners, notes that the increasing use of AI-enabled tools by the tax administration for cross-verification has created apprehension around the old regime. He advises salaried taxpayers to declare their regime choice to employers with proper proofs to avoid mismatches.
Parizad Sirwalla, Partner at KPMG India, points out that the New Income Tax Act, 2025, aims at simplification rather than major policy changes. She stresses the need for updated e-Forms and rules well before March 2026 to ensure smooth implementation.
Budget 2026: Limited Fiscal Headroom but Selective Measures Possible
While experts believe that Budget 2026 may have limited fiscal space for sweeping tax reforms, there is optimism about selective measures to provide relief. The middle class and salaried taxpayers, who have been bearing the brunt of inflation, are hoping for announcements that enhance disposable income and simplify the tax filing process.
As FM Sitharaman takes the podium, all stakeholders will be watching closely for any announcements that could reshape the income tax landscape for the coming financial year.
