Published: 31 January 2026PIBEconomy
Budget 2026-27: No Change in Income Tax Slabs; New Income Tax Act 2025 to Take Effect from April 1, 2026
The Union Budget 2026-27 retained the income tax slab structure introduced in Budget 2025 without any changes. Under the new tax regime, income up to ₹12 lakh remains tax-free (₹12.75 lakh for salaried taxpayers with ₹75,000 standard deduction). The slabs remain: 0-4 lakh nil, 4-8 lakh 5%, 8-12 lakh 10%, 12-16 lakh 15%, 16-20 lakh 20%, 20-24 lakh 25%, above 24 lakh 30%.
The landmark announcement was that the new Income Tax Act, 2025 — replacing the six-decade-old Income Tax Act, 1961 — will come into effect from April 1, 2026. The new Act reduces the number of sections by nearly half. The deadline for revised returns was extended from December 31 to March 31 of the assessment year. Minimum Alternate Tax (MAT) rate was reduced from 15% to 14% and made a final tax. TCS on overseas tours, education, and medical remittances under LRS was uniformly reduced to 2%.
0Mains angle
Q: Discuss the key direct-tax reforms announced in Union Budget 2026-27, with particular reference to the new Income Tax Act 2025 replacing the Income Tax Act 1961.
Answer (50 words):
Budget 2026-27 retained the tax slabs introduced in 2025, keeping income up to ₹12 lakh tax-free. The new Income Tax Act 2025, effective April 1, 2026, replaces the 1961 Act and halves sections. MAT was cut from 15% to 14%, and TCS under LRS was uniformly reduced to 2%.
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Practice MCQ from this story
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Linked questionEasy
When will the new Income Tax Act 2025 come into effect?
Explanation · Correct answer BThe new Income Tax Act 2025 will come into effect from April 1, 2026, replacing the Income Tax Act 1961.
Frequently asked questions
What are the income tax slabs under the new tax regime in Budget 2026-27?
Under the new tax regime retained in Budget 2026-27, income up to **₹12 lakh is tax-free** (₹12.75 lakh for salaried taxpayers with ₹75,000 standard deduction). The slabs are: **0–4 lakh: nil**, 4–8 lakh: 5%, 8–12 lakh: 10%, 12–16 lakh: 15%, 16–20 lakh: 20%, 20–24 lakh: 25%, above 24 lakh: 30%. No changes were made from Budget 2025.
When does the new Income Tax Act 2025 replace the 1961 Act?
The **New Income Tax Act, 2025** replaces the six-decade-old Income Tax Act, 1961, with effect from **April 1, 2026**. The new Act consolidates provisions by reducing sections by nearly half, simplifying language for taxpayers and practitioners.
What is the MAT rate change announced in Budget 2026-27?
The **Minimum Alternate Tax (MAT) rate was reduced from 15% to 14%** in Budget 2026-27, effective April 1, 2026. MAT has been made a **final tax**, meaning no further credit accumulation is allowed from this date.
What is the new deadline for filing revised income tax returns under Budget 2026-27?
Budget 2026-27 extended the deadline for filing revised income tax returns from **December 31 to March 31** of the assessment year, giving taxpayers additional time to correct errors or update returns.
What is the TCS rate on Liberalised Remittance Scheme (LRS) transactions after Budget 2026-27?
Budget 2026-27 **uniformly reduced the TCS rate on LRS remittances to 2%** across all purposes, simplifying the earlier structure that had differential rates. This applies to all foreign remittances made under the Liberalised Remittance Scheme.
