The Union Budget 2026 brought significant changes to the direct tax system for the common people. Finance Minister Nirmala Sitharaman presented her 9th consecutive budget, announcing the replacement of the old 1961 Income Tax Act with the new Income Tax Act 2025. The new rules aim to simplify the process and provide relief on various fees and taxes starting from April 1, 2026.
New Tax Slabs and Savings for Salaried Class
Under the New Tax Regime, the government has increased the rebate limit significantly to help the middle class. Individuals with an annual income of up to ₹12 lakh will not have to pay any tax due to the increased rebate under Section 87A. For salaried employees, the Standard Deduction is set at ₹75,000.
This effectively means a salary earner with an income up to ₹12.75 lakh will pay zero tax. Additionally, the government has simplified the timeline for filing taxes. The confusing system of ‘Assessment Year’ and ‘Previous Year’ is abolished, introducing a single ‘Tax Year’ concept to make things easier for everyone.
Reduction in TDS and TCS Rates
To improve cash flow for the common man, the government has slashed rates for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). These changes apply to rent, insurance, and foreign travel.
| Category | Old Rate | New Rate |
|---|---|---|
| TDS on Rent (>₹50k/month) | 5% | 2% |
| Insurance Commission | 5% | 2% |
| TCS on Foreign Education | 5% | 2% |
| Overseas Tour Packages | Variable | 2% |
Furthermore, the exemption limit for money sent abroad for self-funded education under the Liberalised Remittance Scheme (LRS) is raised. Now, amounts up to ₹10 lakh will attract zero TCS, providing relief to students studying overseas.
Relief for NRIs and Investors
The budget also focused on Non-Resident Indians (NRIs) and the investment sector. The following changes will help those working abroad and people investing in startups:
- Angel Tax Abolished: The Angel Tax has been completely removed, which is a big relief for startup investors and common people investing in new companies.
- NRI Investments: The limit for NRIs to invest in the Indian share market is increased from 10% to 24%.
- Foreign Assets: Heavy penalties for small errors up to ₹20 lakh in foreign asset disclosures have been removed.
- Double Taxation: A new online tool will be introduced to help Indians working abroad claim Foreign Tax Credit easily.
