Budget 2026: Comprehensive Overview of Income Tax and GST Changes
Union Budget 2026 largely retains the existing income-tax rate structure for individuals and entities, but introduces several important compliance relaxations and rationalisation measures across direct tax and GST. The focus is clearly on easing procedural burden, streamlining TDS/TCS, and bringing clarity in areas such as MAT, buy-back taxation, and GST place of supply and refunds.
Below is a structured, practitioner-focused analysis of the major announcements.
A. DIRECT TAX PROPOSALS
1. Income Tax Slabs: No Structural Change in Rates
The Budget does not alter the income-tax slabs or rates for Individuals, HUFs, AOPs and BOIs under either the old or new regime for Financial Year 2026-27 (AY 2027-28). The rate charts are retained as follows.
1.1 New Tax Regime – Individuals below 60 years (FY 2026-27)
The slab-wise rates, surcharge and effective tax rates are unchanged:
| Income Slab | Rate of Tax | Surcharge | Cess (4% on Tax + Surcharge) | Effective Tax Rate (%) |
|---|---|---|---|---|
| Upto Rs. 4 Lakhs | Nil | Nil | Nil | Nil |
| Rs. 4 Lakhs - Rs. 8 Lakhs | 5% | Nil | 0.2% | 5.20% |
| Rs. 8 Lakhs - Rs. 12 Lakhs | 10% | Nil | 0.4% | 10.40% |
| Rs. 12 Lakhs - Rs. 16 Lakhs | 15% | Nil | 0.6% | 15.60% |
| Rs. 16 Lakhs - Rs. 20 Lakhs | 20% | Nil | 0.8% | 20.80% |
| Rs. 20 Lakhs - Rs. 24 Lakhs | 25% | Nil | 1.00% | 26.00% |
| Rs. 24 Lakhs - Rs. 50 Lakhs | 30% | Nil | 1.20% | 31.20% |
| Rs. 50 Lakhs - Rs. 1 Crore | 30% | 3% | 1.32% | 34.32% |
| Rs. 1 Crore - Rs. 2 Crore | 30% | 4.50% | 1.38% | 35.88% |
| Rs. 2 Crore - Rs. 5 Crore & above | 30% | 7.50% | 1.50% | 39.00% |
Note: Surcharge and cess structure is retained as earlier; no relief or enhancement in slabs has been proposed.
1.2 Old Tax Regime – Individuals below 60 years (FY 2026-27)
The long-standing slab structure under the old regime also continues as is:
| Income Slab | Rate of Tax | Surcharge | Cess (4% on Tax + Surcharge) | Effective Tax Rate (%) |
|---|---|---|---|---|
| Upto Rs. 2.5 Lakhs | Nil | Nil | Nil | Nil |
| Rs. 2.5 Lakhs - Rs. 5 Lakhs | 5% | Nil | 0.2% | 5.20% |
| Rs. 5 Lakhs - Rs. 10 Lakhs | 20% | Nil | 0.8% | 20.80% |
| Rs. 10 Lakhs - Rs. 50 Lakhs | 30% | Nil | 1.2% | 31.20% |
| Rs. 50 Lakhs - Rs. 1 Crore | 30% | 3% | 1.32% | 34.32% |
| Rs. 1 Crore - Rs. 2 Crore | 30% | 4.50% | 1.38% | 35.88% |
| Rs. 2 Crore - Rs. 5 Crore | 30% | 7.50% | 1.50% | 39.00% |
| Above Rs. 5 Crore | 30% | 11.10% | 1.644% | 42.74% |
Practical Impact: While assessees do not receive any rate relief, predictability in slabs may help in advance tax planning and regime selection (old vs new).
2. Extended Due Date for Non-Audit Business Assessees
A significant compliance relief has been proposed for certain non-audit assessees engaged in business or profession.
2.1 Who Benefits?
- Assessees carrying on business or profession
- Not liable to audit under the Income Tax Act
- Filing
ITR-3orITR-4 - This relaxation does not apply to individuals filing
ITR-1orITR-2(i.e., primarily salary, house property, and other non-business income).
2.2 New Due Date
- The due date for filing the return of income is extended to 31st August of the subsequent financial year.
- Applicable from
FY 2025-26 / AY 2026-27.
Compliance Note: This provides an extra month beyond the usual 31st July timeline, particularly useful for assessees with business income but no statutory audit requirement.
3. Revised Return: Extended Time with Nominal Late Fees
The time window to correct errors in the original return has been broadened, but with a graded late fee mechanism.
3.1 Extended Time Limit
- Revised return can now be filed up to 31st March of the assessment year.
- Previously, the deadline was 31st December of the assessment year.
3.2 Late Fees for Revised Returns after 31st December
If a revised return is filed after 31st December but up to 31st March, the following late fees will apply: