As Finance Minister Nirmala Sitharaman presented Union Budget 2026 in Parliament, one of the most closely watched announcements was around income tax slabs and personal tax relief. With inflation pressures, rising household expenses, and sustained demands from the middle class, expectations of tax cuts were high. So, what did taxpayers actually get in Budget 2026?
No Major Overhaul of Income Tax Slabs
Contrary to widespread anticipation, Budget 2026 did not announce a sweeping revision of income tax slabs under either the old or the new tax regime. The government has largely stayed the course, reinforcing its earlier position that stability and predictability in taxation are key to long-term financial planning.
The new tax regime, which the government continues to promote as the default option, remains unchanged in terms of slab structure. However, officials emphasized that it still offers lower tax rates in exchange for foregoing most exemptions and deductions.
Standard Deduction and Rebate: Status Quo
There was no increase in the standard deduction, a move that may disappoint salaried taxpayers who were hoping for some immediate relief. Similarly, the rebate under Section 87A, which effectively makes income up to a certain threshold tax-free, remains unchanged in Budget 2026.
That said, the government reiterated that individuals opting for the new tax regime with income within the rebate limit will continue to enjoy zero tax liability.
Focus Shifts from Cuts to Compliance and Simplicity
Rather than offering direct tax cuts, Budget 2026 places strong emphasis on simplifying compliance, speeding up refunds, and reducing litigation. The Finance Minister highlighted improvements in faceless assessments, faster grievance redressal, and better use of AI to flag genuine cases while minimizing harassment of honest taxpayers.
Officials argue that these measures indirectly benefit taxpayers by lowering compliance costs and improving trust in the tax system.
Middle-Class Expectations vs Fiscal Reality
Tax experts note that while there were no headline-grabbing tax cuts, the government appears constrained by fiscal consolidation goals. With heavy capital expenditure planned for infrastructure, defence, and manufacturing incentives, room for aggressive personal tax relief was limited.
However, economists also point out that inflation-adjusted income growth may still push more individuals into higher effective tax brackets, keeping pressure on the government to revisit slabs in future budgets.
New Tax Regime Gets Another Push
Budget 2026 once again nudges taxpayers towards the new tax regime, describing it as “simpler, transparent, and predictable.” While no new incentives were announced, the government made it clear that future reforms will be aligned with this structure, potentially phasing down the relevance of the old regime over time.
What Taxpayers Should Take Away
- ❌ No direct income tax slab changes
- ❌ No increase in standard deduction
- ✅ Continued rebate benefits for lower-income taxpayers
- ✅ Improved compliance, faster refunds, and reduced scrutiny promised
In summary, Budget 2026 stops short of delivering direct income tax cuts, opting instead for administrative reforms and fiscal discipline. While this may feel underwhelming for salaried and middle-class taxpayers in the short term, the government maintains that a stable and simplified tax system will yield longer-term benefits.
