In the Union Budget 2025, the government offered a huge relief to the middle class by announcing that income up to Rs 12 lakh per annum would be tax-free under the new tax regime.
With the Union Budget 2026 slated to be presented by Finance Minister Nirmala Sitharaman in Parliament on February 1st, taxpayers are grappling with excitement regarding any potential change in the tax slabs. Millions of salaried and middle-class taxpayers across the country will be on their toes to know any change in the tax slabs.
Govt’s focus on new tax regime
In previous years, the finance minister has put stress on simplifying and making the income tax system more transparent. In the Union Budget 2020, the government brought a new tax regime, which offered taxpayers the option to forgo deductions and exemptions in exchange for lower tax rates.
The step was aimed at providing relief to taxpayers who preferred a simple way and did not want to go through the complex process of saving taxes through investments. Additionally, the government has been putting efforts into making the new regime more attractive over time. In that regard, the Union Budget 2025 came as a major turning point in this direction.
In the Union Budget 2025, the government offered a huge relief to the middle class by announcing that income up to Rs 12 lakh per annum would be tax-free under the new tax regime. Along with that, the basic exemption limit was increased to Rs 4 lakh by revising the tax slabs. Additionally, the standard deduction for salaried individuals had already been increased to Rs 75,000, providing direct relief to the salaried class.
New Income Tax Act from April 1
A notable change likely to kick in along with Budget 2026 is that the Income Tax Act, 2025, will come into effect from April 1. It will replace the decades-old Income Tax Act, 1961. The upcoming rules will substantially make the language of the rules simpler and easier to understand, while making no major changes to the tax rates or slabs.
While tax experts are of the view that there will be no sweeping changes, they are expecting greater clarity.
“From a tax perspective, we do not anticipate sweeping changes and welcome the move towards the new Income Tax Act. Given its simplified and abridged structure, the underlying rules will be critical, and we look forward to greater clarity in the rules to support effective implementation and compliance,” said Jayesh Bavle, Chief Financial Officer, Bertelsmann India Investments
