Income Tax Slabs Unchanged in Budget 2026–27; FM Announces Key Compliance Reforms

Feb 2026 : Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2026–27 in New Delhi on Sunday, announced that income tax rates and slabs will remain unchanged, maintaining the structure introduced during last year’s landmark tax reforms. Although the core tax framework remains the same, the Budget introduces several measures to simplify compliance, ease filing processes, and offer targeted relief to taxpayers.

Income Tax Slabs (Unchanged)

New Tax Regime:

• ₹0–3 lakh: Nil
• ₹3–7 lakh: 5%
• ₹7–10 lakh: 10%
• ₹10–12 lakh: 15%
• ₹12–15 lakh: 20%
• Above ₹15 lakh: 30%

Key Announcements

To make income tax filing more flexible and taxpayer-friendly, Sitharaman proposed extending the deadline for revising income tax returns. Instead of the earlier cutoff on December 31, individuals will now be able to revise returns until March 31, subject to a nominal fee.

She further introduced staggered filing deadlines tailored to different taxpayer categories. Individuals filing ITR-1 and ITR-2 will continue with the current deadline of July 31, while non-audit business cases and trusts will get additional time, with a new deadline of August 31. The move is expected to reduce last-minute filing pressure and provide more clarity for taxpayers.

In a significant relief measure, interest awarded by the Motor Accident Claims Tribunal (MACT) to individuals will now be exempt from income tax, eliminating the earlier tax deduction at source (TDS) on such payouts. This step ensures that accident victims and their families receive compensation without unnecessary tax burdens.

The Budget also proposes a five-year income tax exemption for Non-Resident Indians (NRIs) who supply capital goods to Indian companies, reflecting the government’s intent to support manufacturing and attract global expertise.

TCS Rate Reductions

To ease the financial load on international travellers and students, the Finance Minister announced reductions in tax collection at source (TCS):

• Overseas tour packages: Reduced from 5%/20% to 2% (no minimum limit)
• Education & medical expenses under LRS: Reduced from 5% to 2%

Simplified Compliance for Small Taxpayers

A new automated system will allow taxpayers to obtain lower or nil deduction certificates without needing approval from the assessing officer. Additionally, taxpayers holding securities across multiple companies can now submit Form 15G/15H to their depositories, which will forward the forms directly to respective companies—eliminating individual submissions.

Changes in Securities Transaction Tax (STT)

To rationalise market taxation, the FM proposed higher STT rates:

• Futures: Increased from 0.02% to 0.05%
• Options: Increased from 0.01% to 0.15%

With these reforms, the Budget 2026–27 focuses on simplifying processes, supporting global mobility, and offering targeted tax relief—while keeping the overall tax structure stable and predictable.