New Income Tax Act from April 2026, No Change in Slabs in Budget 2026
Budget 2026 brings no change in income tax slabs as the New Income Tax Act replaces the 1961 law from April 2026, focusing on simplification over relief.
Budget 2026 has brought no relief in income tax slabs, even as Finance Minister Nirmala Sitharaman announced a complete overhaul of India’s income tax law. The government confirmed that the Income Tax Act, 2025 will replace the Income Tax Act, 1961 from April 1, 2026, without altering slab rates in the interim.
While the Centre has positioned the move as a structural reform aimed at simplification, the absence of slab changes has raised questions about whether the Budget adequately addresses inflationary pressures and stagnant real incomes faced by individual taxpayers.
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New Income Tax Act: Structural Change, Not Financial Relief
The Finance Minister said a comprehensive review of the Income Tax Act, 1961—announced in July 2024—has been completed in record time. The resulting new Income Tax Act, 2025 is intended to simplify language, rules, and compliance processes.
However, the Budget speech offers no clarity on whether simplification will translate into lower compliance costs or reduced litigation, two of the most persistent concerns among taxpayers. While redesigned forms and simplified rules have been promised, their effectiveness will depend on implementation rather than legislative intent.
Notably, the reform focuses on process over policy, leaving core issues such as tax burden distribution untouched.
Income Tax Slabs Frozen Amid Cost-of-Living Pressures
Despite expectations of slab rationalisation, the government confirmed that income tax slabs remain unchanged. This effectively means that taxpayers will continue to pay tax at existing thresholds even as inflation pushes nominal incomes higher.
Economists have long flagged this as a form of “silent tax increase,” where individuals move into higher tax brackets without a real increase in purchasing power. Budget 2026 does not address this concern.
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Budget 2026: Selective Relief Measures, Limited Impact
Several income tax-related proposals were announced under the banner of “Ease of Living,” though their impact appears narrow and sector-specific:
Interest awarded by Motor Accident Claims Tribunals will be exempt from income tax, and related TDS will be removed.
TCS on overseas tour packages has been reduced to 2 per cent, regardless of amount—a move likely to benefit higher-income individuals more than middle-income taxpayers.
TCS under the Liberalised Remittance Scheme for education and medical purposes has also been reduced to 2 per cent.
While these changes reduce friction in specific transactions, they do not address broader concerns around income tax rates, exemptions, or deductions.
TDS Tweaks Focus on Administration, Not Burden
The government clarified that supply of manpower services will fall under contractor payments for TDS purposes, fixing the rate at 1 per cent or 2 per cent.
An automated system for lower or nil TDS certificates for small taxpayers has also been proposed, replacing the need for interaction with assessing officers.
These measures may streamline administration, but critics note that TDS-related complexity is only one part of a wider compliance challenge.
Extended Deadlines, But With Fees
The Budget extends the deadline for revising income tax returns from December 31 to March 31, subject to a nominal fee. Filing timelines have also been staggered:
ITR-1 and ITR-2: July 31
Non-audit business cases and trusts: August 31
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Foreign Asset Disclosure Scheme: Amnesty With Conditions
A one-time six-month foreign asset disclosure scheme has been announced for small taxpayers, students, young professionals and relocated NRIs. However, the scheme comes with significant financial costs:
Taxpayers with undisclosed overseas income or assets up to ₹1 crore must pay 60 per cent of value (30 per cent tax plus 30 per cent additional tax) to gain immunity from prosecution. Those who paid tax but failed to disclose assets up to ₹5 crore must pay a ₹1 lakh fee for immunity.
While positioned as a compliance correction mechanism, such schemes often raise concerns about moral hazard, as compliant taxpayers receive no corresponding benefit.
