The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, is a pivotal event, especially with the Income-Tax Act, 2025, set to be implemented on April 1, 2026. This new Act aims for a simplified, taxpayer-friendly, and predictable tax framework to minimize litigation and improve ease of doing business. Anticipated Union Budget 2026 Income Tax Changes are expected to significantly reshape personal finances and stimulate economic growth and certainly a Good news for tax payers.
Key Proposals and Union Budget 2026 Income Tax Changes
A primary focus is making the new tax regime more appealing by encouraging a transition from the traditional, deduction-laden regime to a simplified structure with lower tax rates is a Good news for tax payers.
- Income Tax Slab Rates: Experts propose widening tax slabs, potentially applying the highest 30% tax rate only to incomes exceeding ₹50 lakh (a significant increase from the current ₹24 lakh limit under the new regime). This could reduce the tax burden on middle and upper-middle-income earners, potentially boosting consumption and savings.
- Section 87A Rebate: An increase in the rebate under Section 87A is widely anticipated to enhance the attractiveness of the new regime.
Relief for Salaried Individuals and Senior Citizens
The salaried class and senior citizens are expecting increased relief.
Impact of Enhanced Standard Deduction: Union Budget 2026 Income Tax Changes
- Standard Deduction: A significant proposal is to increase the standard deduction uniformly to ₹1 lakh for both salaried individuals and pensioners. Currently, it is ₹50,000 (old regime) and ₹75,000 (new regime). This increase would lower taxable income, boost disposable income, and streamline tax filing.
- Senior Citizens: Strong calls exist for introducing separate tax slabs with lower rates specifically for senior citizens (60 and above) under the new tax regime.
Section 80C and Home Loan Deductions: What to Expect
- Section 80C Limit: The existing limit of ₹1.5 lakh (covering PPF, ELSS, life insurance premiums, principal home loan repayment) is widely expected to be substantially increased, potentially to ₹3.5 lakh, to foster increased savings and investments.
- Home Loan Interest Deductions: There is a compelling demand to separate home loan interest deductions from Section 80C and establish a higher, independent limit. Currently, interest is deductible under Section 24(b) (up to ₹2 lakh for self-occupied properties), while principal repayment falls under Section 80C. A higher independent deduction for interest would offer significant tax relief and invigorate the real estate sector.
Corporate Tax Reforms and Overall Simplification
- Easing Compliance Burdens: Streamlining administrative processes for businesses.
- Strengthening Tax Dispute Resolution: Enhancing mechanisms for efficient and fair tax appeal resolution.
- Revamping TDS Regime: Proposals include retaining high-contribution TDS sections, merging or deleting those with minimal revenue impact, and reducing the multiplicity of TDS rates.
- Addressing Backlog of Tax Appeals: Prioritizing resolution to foster a predictable and litigant-friendly environment.
- Concessional Corporate Tax Rate: Reintroducing a 15% concessional corporate tax rate for new manufacturing units to boost investment and job creation.
The New Income Tax Act, 2025: A Simplified Future
The Income Tax Act, 2025, replacing the Income Tax Act of 1961, will be effective from April 1, 2026. This landmark legislation aims to:
- Consolidate and Simplify: Reduce the number of sections from 819 to 536 and chapters from 47 to 23.
- Simplified Tax Provisions: Use clearer language and a streamlined structure for easier understanding.
- Reduced Legal Disputes: Minimize litigation through enhanced clarity and strengthened faceless assessment processes.
- Easier Compliance: Make tax compliance more efficient and user-friendly.
- Modernization: Incorporate provisions for virtual digital assets and align with global best practices.
- Unified Tax Year: Replace “Assessment Year” and “Previous Year” with a single “Tax Year” for clarity.
The Union Budget 2026, alongside the Income Tax Act, 2025, signifies a pivotal period for India’s direct tax landscape. These Union Budget 2026 Income Tax Changes underscore a commitment to fostering economic growth, boosting savings and consumption, and creating an efficient and equitable tax system.
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