Income Tax Changes in Budget 2026: Income Tax Slab Rates for FY 2026-27

With the Union Budget 2026-27 presented on February 1, 2026, new income tax slabs for the next financial year will be released soon. These new slab rates will apply from April 1, 2026, and it is important for taxpayers to be aware of them.

Taxpayers should note that, as of now, no change has been announced in slabs. However, important changes announced by the government are:

New Income Tax Act: The new act will come into effect from April 1, 2026, with simpler income tax forms to be notified shortly.

TDS on Property: TDS on property purchased from NRI can now be deducted under PAN-based instead of TAN.

TCS Limit: TCS limit on tour packages reduced from 5%/20% to 2% without any limit.

ITR Filing: Time limit to file ITR increased from December 31 to March 31, with staggered timelines for different types of taxpayers.

Exemptions: Interest awarded by the Motor Accident Claims Tribunal to natural persons will be exempt from income tax, and TDS on the same will be done away with.

Reform in MAT Provisions

• Minimum Alternate Tax to be the Final Tax
• ⁠No further MAT Credit from 1 April 2026
• ⁠MAT Rate reduced from 15% to 14%
• ⁠Brought Forward MAT Credit to the extent of only 1/4th is allowed to be set-off in the New Regime.

Other Key Points:

• Supply of Manpower Services to be brought under Section 194C of the Income Tax Act 1961.
• Immunity from Penalty now includes the Misreporting of Income provisions.
• Dividend exempted to co-op sector on fulfilling specified conditions.
• TCS on the Liberalised Remittance Scheme reduced from 5% to 2%, and TCS on the Overseas Travel Package reduced from 5% to 2%.

These changes are expected to bring relief to taxpayers and simplify the tax filing process.