Budget 2026 Replaces 1961 Tax Act with Simplified Code

Finance Minister Nirmala Sitharaman presented the Union Budget 2026–27 on Feb. 1, delivering a tax agenda that maintains existing personal income tax rates and slabs while spotlighting reform of the underlying law rather than relief via rate cuts.

Under both tax regimes (new and old), the basic structure remains:

New Regime (unchanged):

• ₹0 – ₹4 L: Nil
• ₹4 – ₹8 L: 5%
• ₹8 – ₹12 L: 10%
• ₹12 – ₹16 L: 15%
• ₹16 – ₹20 L: 20%
• ₹20 – ₹24 L: 25%
• Above ₹24 L: 30% 

Old Regime (unchanged):

• Up to ₹2.5 L: Nil
• ₹2.5 – ₹5 L: 5%
• ₹5 – ₹10 L: 20%
• Above ₹10 L: 30% 

This continuity signals that rate relief for individuals, especially the salaried and middle class, is not the budgetary priority this year. Instead, reforms lean on transparency and ease of compliance. 

A New Income Tax Act Takes Centre Stage

Perhaps the most consequential shift for taxpayers is institutional: the Income Tax Act, 2025, will replace the six-decade-old 1961 law, officially taking effect from April 1, 2026.

Key features of the new tax code include:

• Simplified structure: Sections reduced by ~50%, aiming to cut legal clutter and uncertainty. 
• Single “Tax Year”: Replaces the separate notions of “previous year” and “assessment year”, closing a long-standing technical confusion. 
• Late ITR refunds: Taxpayers can now claim TDS refunds even if returns are filed after deadlines, with no penalties under certain conditions. 
• MAT relief:Minimum Alternate Tax (MAT) exemption extended to certain non-resident taxpayers using presumptive schemes.
• Safe harbour expansion: For transfer pricing in IT and IT-enabled services, the threshold rises sharply: a notable relief for service exporters. 

These structural changes sway policy emphasis from who pays how much tax to how predictable and navigable the system is. Such a shift matters for startups, professionals, and cross-border investors who often bear compliance friction and interpretation risk.

Filing Ease and Compliance Tweaks

The budget put forward several taxpayer-friendly procedural reforms:

• ITR Revision Timeline Extended: Taxpayers can revise returns up to March 31 (from Dec 31) on payment of a nominal fee: a practical change for high-volume filing periods. 
• TDS/TCS Rationalisation: The Tax Collected at Source (TCS) rates on education and medical remittances under LRS fall from 5% to 2% and also apply to overseas tour packages, easing the cost of global engagements. 
• Property TDS: TDS on the sale of immovable property by non-residents will be facilitated via PAN-based challan instead of requiring a TAN, reducing procedural friction.
• Manpower services under TDS: The supply of manpower services now attracts TDS, broadening compliance coverage.

These moves lean into digital filing behaviour, predictable remittances and broader tax base administration, themes that matter to corporates, chartered accountants and multinational employers alike.

Middle Class Tax Pulse: Stability Over Relief

By not altering slabs, the government effectively retains the tax relief framework introduced in the 2025 budget, where taxpayers with income up to ₹12 L (about ₹12.75 L for salaried individuals after standard deduction) could pay zero tax in the new regime. 

From a policy perspective, the absence of further rate cuts — amid inflationary pressures and fiscal consolidation — indicates a deliberate restraint on revenue sacrifice, even as compliance and clarity are prioritised.

For the B2B audience, entrepreneurs, CFOs and tax leads, the defining thread of the Union Budget 2026 is legal simplification over headline‐grabbing deductions.

The new Income Tax Act’s structural re-architecture, reduction in outdated provisions, procedural predictability, and targeted compliance adjustments embody a long-term tax administration vision rather than short-term relief. In an era of digital filing, cross-border talent movement, and rapid startup formation, such certainty can be as valuable, if less immediately exciting, as rate cuts.