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After the Union Budget 2026, income tax once again remains a key concern for salaried individuals and middle-class taxpayers. While many were expecting changes in tax slabs or fresh relief, the Finance Minister chose to maintain the existing structure. As a result, the long-standing confusion between the new tax regime and the old tax regime continues.

Although no major slab revisions were announced, choosing the right tax system has become even more important in FY 2026–27, as the decision directly impacts how much tax you finally pay.

No Change in Tax Slabs, Stability Continues

For FY 2026–27, the new tax regime slabs have been retained without any changes. Under this system, income up to ₹4 lakh remains tax-free. Income between ₹4 lakh and ₹8 lakh is taxed at 5%, while income between ₹8 lakh and ₹12 lakh attracts a 10% tax rate. The slabs gradually increase, with the highest tax rate of 30% applying to income above ₹24 lakh.

The government’s decision signals continuity rather than reform, giving taxpayers predictability but no fresh relief through slab restructuring.

Zero Tax Benefit Still Available up to ₹12 Lakh

One of the biggest advantages of the new tax regime continues in Budget 2026. Resident individuals earning up to ₹12 lakh annually remain eligible for full tax rebate, effectively making their tax liability zero.

For salaried taxpayers, the benefit is even higher due to the ₹75,000 standard deduction, allowing income up to ₹12.75 lakh to remain tax-free. This makes the new tax regime especially attractive for individuals with limited deductions and a straightforward salary structure.

Why the New Tax Regime Works for Many Taxpayers

The new system offers:

• Lower tax rates

• Minimal paperwork

• No need for complex tax planning

• Faster and simpler return filing

Tax experts suggest that taxpayers who do not heavily invest in tax-saving instruments or claim housing and insurance deductions often benefit more from the new regime.

Old Tax Regime Still Relevant for High-Deduction Earners

The old tax regime remains unchanged and continues to favor taxpayers who make full use of exemptions and deductions. Under this system, income up to ₹2.5 lakh is tax-free, followed by slabs of 5%, 20%, and 30%.

Key deductions under the old regime include:

• Section 80C investments (PF, PPF, ELSS, LIC)

• Section 80D (medical insurance)

• House Rent Allowance (HRA)

• Leave Travel Allowance (LTA)

• Home loan interest

• National Pension System (NPS) contributions

For individuals claiming deductions worth ₹7–8 lakh or more annually, the old tax regime may still result in lower tax outgo, especially for higher income brackets.

Which Tax Regime Should You Choose?

• Income up to ₹12 lakh: New tax regime is clearly better due to zero tax liability

• Salaried individuals with minimal deductions: New tax regime offers simplicity and savings

• High-income taxpayers with large deductions: Old tax regime may result in better tax savings

Ultimately, the right choice depends on your income level and the deductions you can realistically claim.

Other Tax Changes Introduced in Budget 2026

While tax slabs remain unchanged, Budget 2026 introduced several procedural improvements:

• Revised ITR filing deadline extended to March 31 (with a nominal fee)

• ITR-1 and ITR-2 filing deadline set at July 31

• Extended timelines for non-audit business cases

• Interest on Motor Accident Claims Tribunal compensation made tax-free

• Reduction in TCS under Liberalised Remittance Scheme for select expenses

What Lies Ahead

The new Income Tax Act, 2025, scheduled to take effect from April 1, 2026, is expected to simplify tax laws further. While the framework remains the same for now, compliance and filing are set to become easier in the coming years.