Changes made in Union Budget 2026

This article summarizes the key income-tax provisions under the Income-tax Act, 2025, incorporating important changes introduced through Union Budget 2026, for ready reference.

  1. Income Tax for Individuals, HUF, AOP & BOI

   (A) Under New Tax Regime (Section 202(1)) – Default Regime)

           1. Slabs (No Change)

2. Key Deductions Allowed

• Standard deduction (salary): ₹75,000
• Family pension: Lower of ₹25,000 or 33⅓%
• Employer contribution to NPS: Up to 14% of salary
• Agniveer Corpus Fund contribution: 100%
• Biodegradable waste business profit: 100% for 5 years
• IFSC unit income: 100% for 20 years (out of first 25 years)

Rebate: Up to ₹60,000 for resident individuals with income up to ₹12 lakh

3. Exempt Incomes

• Agricultural income
• Eligible life insurance proceeds
• Interest/withdrawals from PPF, RPF, Sukanya Samriddhi, NPS (as prescribed)
• Scholarships, awards, gratuity, pension commutation
• Approved superannuation fund receipts
• VRS compensation
• Non-monetary perquisites

Recognised provident fund interest/withdrawal

4. Surcharge (Subject to Marginal Relief)

• Up to ₹50 lakh: Nil
• ₹50 lakh – ₹1 crore: 10%
• ₹1 crore – ₹2 crore: 15%

Above ₹2 crore: Higher rates as prescribed

5. Health & Education Cess

4% of income tax plus surcharge

(B) Old Tax regime (Optional)

1. Slabs

• General category: Basic exemption ₹2.5 lakh
• Senior citizens (60+): ₹3 lakh
• Very senior citizens (80+): ₹5 lakh

Slab rates remain unchanged (5%, 20%, 30%)

2. Key Deductions Allowed

• Standard deduction (salary): ₹50,000
• Housing loan interest (self-occupied): ₹2 lakh
• Section 123 investments (PF, LIC, ELSS, etc.): ₹1.5 lakh
• NPS additional deduction: ₹50,000
• Mediclaim: ₹25,000 / ₹50,000 (senior citizens)
• Education loan interest: Fully deductible
• First residential house interest (Section 131): ₹1.5 lakh
• Electric vehicle loan interest: ₹1.5 lakh
• Rent paid deduction (Section 134)
• Savings account interest: ₹10,000
• Senior citizen deposits interest: ₹50,000

Rebate: ₹12,500 for income up to ₹5 lakh

3. Exempt Incomes

        Same as allowed under the New Tax Regime.

4. Surcharge & 5. Cess

         Same as New Tax Regime.

(C) Income-wise Tax Treatment (Individuals)

• Salary Income
  Standard deduction allowed (₹75,000 new / ₹50,000 old). Most allowances disallowed in the new regime.
• Business Income
  (a) Normal taxation or presumptive taxation;
  (b) No Adjustment of Losses brought forward from earlier years and Additional depreciation not allowed in new regime.
• Capital Gains
  • STCG on equities: 20%
  • LTCG on equities: 12.5% above ₹1.25 lakh
  • LTCG (non-equity): 12.5% without indexation
  • Virtual digital assets (crypto/NFT): 30% (no set-off allowed)
• House Property
  Interest on self-occupied house not allowed in new regime; allowed up to ₹2 lakh in old regime.
• Income from Other Sources
  Savings and deposit interest taxed as per regime, with deductions only in old regime.
  

  
  2. Partnership Firms & LLPs

  Tax rate: 30%

• Surcharge: 12% if income exceeds ₹1 crore
• Health & education cess: 4%
• Partner remuneration and interest allowed only if specified in partnership deed
• Maximum interest on capital: 12% p.a.
• TDS @10% on payments to partners exceeding ₹20,000
  

  
  3. Companies

Domestic Companies

• Turnover up to ₹400 crore: 25%
• Other domestic companies: 30%
• Eligible start-ups: 0% tax for 3 out of 10 years (MAT applicable)

Minimum Alternate Tax (MAT)

• IFSC companies: 9%
• Other companies: 14%

Optional Corporate Tax Regimes

• Section 199: 25%
• Section 200: 22%
• New manufacturing companies: 15% (subject to conditions)
  

  4. Presumptive Taxation

  • Small businesses:
    6% (digital receipts) / 8% (cash receipts)
  • Professionals:
    50% of gross receipts
  • Audit mandatory if lower profit declared
  • No deduction for partner remuneration/interest
  • Exit from scheme disallows re-entry for 5 year
    

      5. Audit Limits

• Business turnover:
  ₹1 crore (₹10 crore if 95% transactions are non-cash)
• Profession gross receipts:
  ₹50 lakh
• Audit compulsory if declared profit is lower than presumptive income

     6. Cash Transaction Restrictions

• Cash expense limit: ₹10,000 per day per person
• Goods carriage payments: ₹35,000 per day
• Cash receipt limit: ₹2 lakh
• Cash withdrawal above limits attracts TDS
• TDS @1% on purchase of virtual digital assets beyond prescribed thresholds

    7. Other Important Changes

• Updated return allowed up to 48 months with additional tax
• Late filing fee:
  ₹1,000 (income ≤ ₹5 lakh), ₹5,000 (above)
• MSME payments deductible only on actual payment if outstanding beyond 45 days
• Alternate Minimum Tax not applicable under new default regime