Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2026–27 in Parliament on Sunday, announced that the new Income Tax Act, notified in July 2025, will officially come into force from April 1, 2026.
The announcement marks a major step in India’s long-term tax reform agenda, aimed at simplifying compliance, improving transparency, and making the tax system more taxpayer-friendly.
Focus on Personal Income Tax Reforms
Personal income taxation emerged as a key focus area in Budget 2026, with measures designed to respond to taxpayer expectations and support sustained economic growth. The finance minister also proposed a rule-based automated process for small taxpayers, intended to reduce litigation and enhance ease of compliance.
Budget 2026 Anchored on Three ‘Kartavyas’
Opening her Budget speech, Sitharaman outlined three central ‘kartavyas’ (duties) guiding the government’s fiscal strategy:
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Accelerating and sustaining economic growth while building resilience against volatile global conditions
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Fulfilling the aspirations of people by strengthening their skills and capacities
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Ensuring equitable access to resources, amenities, and opportunities for every family, community, region, and sector
Context: Major Income Tax Changes in Budget 2025
The announcement builds on the significant overhaul of the personal income tax regime introduced in the Union Budget 2025–26, which aimed to increase disposable income for the middle class and boost consumption, savings, and investment.
Under the new tax regime announced in Budget 2025:
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Annual income up to ₹12 lakh was made tax-free
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For salaried individuals, income up to ₹12.75 lakh became tax-free due to a standard deduction of ₹75,000
Revised Tax Slabs Under the New Tax Regime
The revised income tax slabs introduced in Budget 2025 are as follows:
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₹0 – ₹4 lakh: Nil
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₹4 – ₹8 lakh: 5%
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₹8 – ₹12 lakh: 10%
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₹12 – ₹16 lakh: 15%
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₹16 – ₹20 lakh: 20%
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₹20 – ₹24 lakh: 25%
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Above ₹24 lakh: 30%
The highest tax rate of 30% now applies only to income exceeding ₹24 lakh, significantly broadening the lower tax slabs.
Toward a Simplified Tax Code
Budget 2025 also introduced a new Income Tax Bill to replace the decades-old Income Tax Act of 1961, with the goal of simplifying provisions, removing redundancies, and modernizing India’s tax framework. The enforcement of the new Income Tax Act from April 2026 represents the next phase of this structural reform.
