The Union Budget 2026–27, presented by Finance minister Nirmala Sitharaman, has introduced a mix of direct tax measures that will shape how salaried individuals file returns, pay taxes, and plan their finances in the coming year. While there were no changes in basic tax rates or slabs for FY 2026–27, a number of procedural and structural reforms were announced that directly affect salaried taxpayers.

Here are the 10 key income tax changes to understand:

1. Income Tax Slabs Remain Unchanged

The Budget did not revise the income tax slabs for individuals. Salaried taxpayers will continue to be taxed under existing slab rates in both the new and old tax regimes.

· Under the new regime, income up to ₹4 lakh is tax-free, rising progressively to 30% on income above ₹24 lakh.

· The standard deduction remains at ₹75,000, and the Section 87A rebate continues up to ₹12 lakh of taxable income.

2. New Income Tax Act, 2025 Comes Into Force

A major structural change is the introduction of the Income Tax Act, 2025, which will replace the decades-old 1961 law starting from 1 april 2026. This is expected to simplify language, procedures, and compliance for taxpayers, including salaried individuals.

3. Simplified & User-Friendly Return Forms

Tax return forms have been redesigned to make compliance easier for ordinary taxpayers, reducing confusion and errors in filing.

4. Extended Deadline for Revised Returns

The deadline to revise income tax returns has been extended from 31 december to 31 March, giving salaried taxpayers more time to correct mistakes or update returns.

5. Motor accident Compensation Interest Now Tax-Free

Interest received as part of motor accident compensation will now be fully exempt from income tax, and TDS on such payouts has been removed—a welcome relief for families dealing with compensation claims.

6. Lower tcs on Overseas Payments

Tax Collected at Source (TCS) on foreign tour packages and remittances for education and medical treatment under the Liberalised Remittance Scheme (LRS) has been reduced to 2%, easing the tax burden on salaried individuals making such payments abroad.

7. Revised TDS/TCS Compliance Rules

The Budget clarified and updated TDS and tcs provisions, including clearer rules for manpower supply services and other payments, which affects how employers and individuals manage deductions.

8. Better Litigation & Penalty Relief

New rules allow interest not to be charged on disputed tax penalties during appeal periods, and the pre-payment requirement before filing appeals has been reduced. These measures help salaried taxpayers contest assessments without excessive upfront cash outflow.

9. Staggered Timelines for ITR Filing

The Budget proposes staggered ITR filing deadlines (e.g., July 31 and august 31 for various categories), designed to decongest the filing season and make compliance more manageable.

10. Enhanced Focus on wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital & Paperless Compliance

The government has reiterated its push toward data-faceless assessments and wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital filing systems, which should reduce paperwork and processing times for salaried individuals.

What This Means for Salaried Employees

➡️ No immediate tax rate cuts means most salaried taxpayers will not see lower tax bills simply because of Budget 2026.
➡️ Relief comes through procedural changes, compliance flexibility, and targeted tax benefits such as the motor accident interest exemption.
➡️ Continued consistency in slabs and rebates keeps tax planning predictable amid the transition to the new Income Tax Act.

 

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