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The Union Budget 2026 was closely watched by taxpayers across income groups, especially salaried employees and self-employed professionals, hoping for relief amid rising living costs. While Budget 2026 did not overhaul income tax slab rates, it reinforced and refined the existing tax framework, making it essential for taxpayers to clearly understand how the Budget 2026 income tax slabs apply to them.
Key Takeaways
Budget 2026 did not change income tax slab rates, but retained both old and new tax regimes for individual taxpayers
The new tax regime continues as the default option, offering lower slab rates but requiring taxpayers to forgo most deductions
Salaried taxpayers benefit from the standard deduction and rebates under the new regime, especially for incomes up to ₹12 lakh
Self-employed professionals must evaluate deductions and business expenses carefully before choosing between tax regimes
Choosing the right tax regime under Budget 2026 depends more on income structure and deductions than on slab rates alone
For many individuals, confusion often arises not just from slab rates but also from how the old and new tax regimes differ, which deductions are available, and how final tax liability changes. This blog breaks down the new tax slabs 2026, explains their impact on both salaried and self-employed taxpayers, and helps you assess which regime works better for your income profile.
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Overview of India’s Income Tax Structure
Before examining what Budget 2026 means for your taxes, it is important to understand how income tax slabs function in India.
India follows a progressive tax system, where higher portions of income are taxed at higher rates. Taxpayers can currently choose between two systems:
The old tax regime: Which allows multiple deductions and exemptions
The new tax regime: Which offers lower slab rates but requires taxpayers to give up most deductions.
Budget 2026 has retained this dual-regime structure, with the new regime remaining the default, unless a taxpayer explicitly opts for the old one.
Major Highlights of Budget 2026 for Individual Taxpayers
While expectations of a complete slab revision were high, Budget 2026 focused more on stability and simplification rather than dramatic changes. The key highlights include:
No change in slab rates under either regime
Continued emphasis on the new tax regime as the default
Retention of standard deduction benefits for salaried taxpayers
Higher effective tax relief at lower income levels through rebates under the new regime
These measures aim to simplify compliance while ensuring that middle-income taxpayers continue to receive relief
Income Tax Slabs Under the New Tax Regime (FY 2026-27)
To understand how the new system works, it helps to first look at the slab structure under the new regime. The new tax regime is designed for taxpayers who prefer lower rates and fewer exemptions. It suits individuals who do not claim large deductions such as HRA, Section 80C, or home loan interest. Below is the applicable slab structure under the new tax regime for FY 2026-27:
Annual Taxable Income
Tax Rate
Up to ₹4,00,000
Nil
₹4,00,001 - ₹8,00,000
5%
₹8,00,001 - ₹12,00,000
10%
₹12,00,001 - ₹16,00,000
15%
₹16,00,001 - ₹20,00,000
20%
₹20,00,001 - ₹24,00,000
25%
Above ₹24,00,000
30%
In addition to these slabs, resident individuals can earn up to ₹12 lakh benefit from a Section 87A rebate, which effectively reduces their tax liability to zero under the new regime, subject to conditions. Salaried taxpayers also continue to receive a standard deduction of ₹75,000.
Income Tax Slabs Under the Old Tax Regime (FY 2026–27)
The old tax regime remains unchanged and continues to appeal to taxpayers who actively use exemptions and deductions. This regime allows benefits such as:
The slab structure under the old tax regime is as follows:
Annual Taxable Income
Tax Rate
Up to ₹2,50,000
Nil
₹2,50,001 – ₹5,00,000
5%
₹5,00,001 – ₹10,00,000
20%
Above ₹10,00,000
30%
Senior citizens continue to enjoy higher basic exemption limits under this regime, though these limits remain unchanged in Budget 2026.
Did You Know?
Salaried taxpayers can switch between the old and new tax regimes every year, but self-employed taxpayers can switch only once in a lifetime
Source: Income Tax
How Budget 2026 Affects Salaried Taxpayers?
For salaried individuals, even small structural decisions in the tax framework can influence take-home pay and annual savings. Under Budget 2026, salaried taxpayers benefit primarily through:
The standard deduction, which reduces taxable salary income
A simplified default tax filing experience under the new regime
Salaried individuals earning up to ₹12 lakh under the new regime can effectively pay no income tax due to the combined impact of the standard deduction and rebate, provided no other income pushes them above the threshold.
may still find the old tax regime more beneficial, despite its higher slab rates. The key takeaway for salaried individuals is that slab rates alone do not determine tax liability; deductions play an equally critical role.
Impact of Budget 2026 on Self-Employed and Professionals
Self-employed taxpayers, including freelancers, consultants, and small business owners, experience the tax changes differently. Unlike salaried individuals, the self-employed do not receive a standard deduction but can claim:
Under Budget 2026, slab rates remain unchanged for self-employed taxpayers as well. However, many professionals may prefer the old regime if they incur substantial business-related deductions. For freelancers with minimal expenses and predictable income, the new tax regime may offer simpler compliance and lower effective rates. Thus, the choice of regime becomes more strategic for self-employed taxpayers than for salaried individuals.
Who Benefits the Most From Budget 2026 Income Tax Slabs?
Not all taxpayers are impacted equally by the current structure. Broadly speaking:
Low-income taxpayers benefit the most under the new regime due to rebates
Middle-income salaried employees gain from the standard deduction and simplified slabs
High-income earners see limited relief due to unchanged top tax rates
Self-employed professionals benefit based on their ability to claim deductions
The absence of slab changes means tax planning decisions carry greater weight than before.
Real-World Tax Impact: Sample Scenarios
Understanding tax slabs becomes clearer when viewed through real-world examples.
Consider a salaried individual earning ₹8 lakh annually.
Under the new tax regime, such a taxpayer may end up paying minimal or even zero income tax after accounting for the applicable rebate and standard deduction
However, under the old tax regime, the tax liability could be higher unless the individual actively claims deductions such as Section 80C investments, HRA, or other eligible exemptions
Now, take the case of a self-employed professional earning ₹15 lakh per year.
If this individual incurs significant business-related expenses and can claim deductions, the old tax regime may result in lower overall tax liability
On the other hand, if expenses are limited and the taxpayer prefers simpler compliance with fewer calculations, the new tax regime may prove more suitable despite fewer deductions
Together, these examples underscore that choosing between the old and new tax regimes is not a one-size-fits-all decision. The right choice depends heavily on income level, the nature of earnings, and eligibility for deductions, making tax planning highly income-specific.
Tax Planning Tips Post Budget 2026
Even with stable slab rates, smart tax planning remains essential. Taxpayers should:
Always calculate the tax payable under both the old and new regimes before making a final choice, as the lower slab rates may not always result in lower tax
Only include deductions you are genuinely eligible for and can document, such as actual investments, insurance premiums, or rent paid, to avoid last-minute surprises
Salaried individuals should review components like allowances and reimbursements, while self-employed taxpayers should reassess allowable business expenses each year
Consider the impact of the standard deduction and the Section 87A rebate, especially if your income is near the rebate threshold
Slab rates alone do not determine tax savings; deductions, exemptions, and income composition often have a greater impact on final tax outgo
Early tax planning allows better use of deductions and avoids rushed or sub-optimal investment decisions
Conclusion: What Taxpayers Should Take Away From Budget 2026?
Budget 2026 may not have introduced sweeping changes to income tax slabs, but it reinforces the existing framework. With the new tax regime firmly established as the default, taxpayers must evaluate whether simplicity or deductions better serve them.
For salaried individuals, the balance between standard deduction and exemptions determines the better choice. For self-employed taxpayers, expense patterns play a decisive role.
Ultimately, the Budget 2026 income tax slabs underscore one clear message: understanding your income structure matters more than ever. Choosing the right regime can make a meaningful difference to your post-tax income without any change to slab rates.
Glossary
Standard Deduction: A fixed amount deducted from salary income to reduce taxable income, available to salaried taxpayers
Presumptive Taxation: A simplified tax scheme where income is assumed at a fixed rate, mainly for small businesses and professionals
Section 87A Rebate: A tax rebate that reduces or eliminates tax liability for resident individuals within specified income limits
House Rent Allowance: An allowance paid by employers to employees to meet rental housing expenses, with partial tax exemption
EPF: Employees’ Provident Fund scheme, where employees and employers contribute monthly, with tax benefits on contributions
FAQs
No. Budget 2026 did not change income tax slab rates under either regime. The existing slab structure continues for FY 2026-27.
The new tax regime remains the default option. However, taxpayers can still opt for the old regime if it results in lower tax liability.
Salaried taxpayers continue to receive standard deduction and rebate benefits under the new regime, reducing taxable income and tax payable.
Self-employed taxpayers see no slab changes but must choose a regime based on business expenses, deductions, and compliance simplicity.
Taxpayers should calculate the tax payable under both regimes, taking into account income, deductions, and expenses, before selecting the option that yields the lower tax liability.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
