Overview of Union Budget 2026-27
Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on February 1, 2026 — the first budget to be read alongside the new Income Tax Act, 2025, which replaces the six-decade-old Income-tax Act, 1961 from April 1, 2026. Unlike the sweeping slab revisions of Budget 2025-26, this year's budget focused on compliance simplification, procedural relief, and targeted sector support rather than large-scale rate changes.
That does not mean nothing changed. Return filing timelines have shifted, TDS/TCS procedures have been simplified, a new one-time disclosure window has opened for taxpayers with unreported foreign assets, and several GST provisions have been amended to ease refunds for exporters and MSMEs. This article walks through every confirmed change and what it means for you.
Income Tax Slabs — No Change for FY 2026-27
The Budget did not revise personal income tax slabs or rates. The slab structure introduced in Budget 2025-26 under the New Tax Regime (Section 115BAC) continues to apply for FY 2026-27 (AY 2027-28):
- Up to ₹4 lakh — Nil
- ₹4 lakh to ₹8 lakh — 5%
- ₹8 lakh to ₹12 lakh — 10%
- ₹12 lakh to ₹16 lakh — 15%
- ₹16 lakh to ₹20 lakh — 20%
- ₹20 lakh to ₹24 lakh — 25%
- Above ₹24 lakh — 30%
Standard Deduction and Rebate — Unchanged
The standard deduction (₹75,000 for salaried individuals and pensioners under the New Tax Regime) and the Section 87A rebate — which together make income up to ₹12.75 lakh effectively tax-free for salaried taxpayers — also remain unchanged. If you were taxed under these provisions last year, your calculation stays the same for FY 2026-27.
The New Income Tax Act, 2025 Comes Into Force
The most structurally significant development this year is not a rate change but a rewrite: the Income Tax Act, 2025 takes effect from April 1, 2026, replacing the Income-tax Act, 1961. The new Act simplifies language, removes redundant provisions, and consolidates scattered sections — by itself, it does not change tax rates or slabs.
To help taxpayers transition, the government launched PRARAMBH 2026, a nationwide awareness campaign explaining the key structural changes in the new Act. Detailed procedural rules under the new Act are being notified in phases — professionals should keep tracking CBDT notifications through FY 2026-27 rather than assume the old Act's forms and timelines carry over unchanged.
Return Filing and Compliance Timelines
Several filing-related timelines have been adjusted for FY 2026-27:
- Original ITR filing due dates are now staggered by taxpayer category — salaried individuals by July 31, non-audit business taxpayers by August 31
- The window for filing a revised return has been extended from December 31 to March 31 of the relevant assessment year, subject to a nominal fee
- A one-time, six-month voluntary disclosure window — the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 — allows eligible taxpayers to declare previously undisclosed foreign income or assets within specified thresholds, with immunity from penalty and prosecution
TDS and TCS Updates
Several procedural changes affect how tax is deducted and collected at source:
- TCS on overseas remittances under the Liberalised Remittance Scheme (LRS) — including overseas tour packages, education, and medical treatment abroad — has been reduced to a flat 2%
- Taxpayers eligible for TDS exemption on dividend, interest, or mutual fund income can now file a single declaration with their depository instead of separate Form 15G/15H submissions to each payer
- Applications for a Lower or Nil TDS/TCS certificate can now be filed online using an Electronic Verification Code (EVC), without a digital signature
- Payments for manpower supply services are now treated as contractor payments for TDS purposes, attracting a lower TDS rate of 1% or 2%, reducing classification disputes for businesses
Capital Gains and Share Buyback Taxation
The Budget made one targeted change to capital gains: income from share buybacks is now classified as capital gains in the hands of non-promoter shareholders, rather than being taxed as deemed dividend income. This changes both the applicable tax rate and the point at which tax is triggered for investors who receive buyback proceeds. No broader change was announced to long-term or short-term capital gains rates on equity, mutual funds, or property.
MSME, Startup, and Presumptive Taxation — What Stayed the Same
Unlike some previous budgets, FY 2026-27 did not bring a revision to presumptive taxation turnover limits under Sections 44AD/44ADA, nor a change to corporate tax rates applicable to MSMEs or startups. Existing incentives — including the startup tax holiday under Section 80-IAC for DPIIT-recognised entities — continue to apply under their existing conditions and timelines.
The more tangible relief for MSMEs this year comes indirectly, through GST refund and compliance simplification (covered below). Business owners should not assume new thresholds apply — verify eligibility against the existing, unchanged criteria before making tax planning decisions.
Corporate and International Tax Updates
For companies, particularly in IT/ITeS and international financial services, the budget brought targeted relief:
- Safe Harbour eligibility for IT and ITeS companies raised from ₹300 crore to ₹2,000 crore in turnover, with a unified safe harbour margin of 15.5%, removing the earlier low-end/high-end classification
- Advance Pricing Agreements (APAs) are to be processed on a fast-tracked timeline
- The tax holiday for IFSC (GIFT City) units has been extended to 20 years, followed by a concessional tax regime thereafter
- Foreign cloud and data centre service providers get a tax exemption on eligible data centre income, available up to March 2047
Digital Economy and Crypto-Asset Compliance
The Budget tightened reporting obligations for crypto-asset transactions, with an explicit penalty structure:
- ₹200 per day for non-furnishing of the required statement of crypto-asset transactions
- ₹50,000 for furnishing inaccurate particulars in that statement
GST and Indirect Tax Amendments
The Finance Bill 2026 gave legislative effect to several GST changes recommended by the GST Council, amending the CGST and IGST Acts:
- Intermediary services: the special place-of-supply rule under Section 13(8)(b) of the IGST Act has been removed, bringing agency and facilitation services under the general place-of-supply rule — allowing many export-facilitation and outsourcing services to qualify as zero-rated exports instead of carrying an embedded GST cost
- Post-sale discounts: Section 15(3)(b) of the CGST Act has been eased, removing the requirement of a pre-existing agreement referenced in the invoice before a discount can be deducted from taxable value, subject to prescribed conditions
- Export refunds: Section 54(14) of the CGST Act has been amended to remove the ₹1,000 minimum refund threshold for export of goods on payment of tax — smaller exporters can now claim refunds regardless of value
Impact on Salaried Employees
Your tax slabs, standard deduction, and rebate stay exactly as they were for FY 2025-26 — if your income and deductions haven't changed, your take-home tax calculation won't either. The main action item is administrative: confirm your employer's payroll system reflects the staggered ITR filing deadline (July 31) and hasn't applied an outdated TDS rate to your investment declarations.
Impact on Freelancers and Professionals
With no change to presumptive taxation limits, freelancers and professionals filing under Section 44ADA continue to operate under existing turnover thresholds and presumed income rates. If you receive foreign remittances for services rendered, note the simplified TDS/TCS declaration process — and if you hold undisclosed foreign income or assets from international clients, the one-time disclosure scheme is worth evaluating with a tax professional before its six-month window closes.
Impact on Small Businesses and MSMEs
The most tangible relief for small businesses is on the GST side — particularly the removal of the minimum export refund threshold and the easier treatment of post-sale discounts, both of which improve working capital and reduce documentation disputes. On the direct tax side, no rate or threshold changes apply, so continue operating under your existing presumptive taxation or regular assessment framework, whichever you currently use.
Impact on Companies
Corporate tax rates are unchanged, but companies — particularly in IT/ITeS, financial services, and technology infrastructure — should assess the expanded Safe Harbour thresholds, fast-tracked APAs, and IFSC tax holiday extension for relevance to their structure. Companies issuing share buybacks should also reassess shareholder communication, since the tax incidence for non-promoter shareholders has shifted to capital gains treatment.
Impact on Investors
If you received buyback proceeds this year, the reclassification to capital gains changes how that income is taxed compared to the earlier deemed-dividend treatment — get this computed correctly rather than assuming last year's treatment applies. No change was made to capital gains rates on listed equity, mutual funds, or other asset classes.
Impact on Senior Citizens
No new senior-citizen-specific tax benefit was announced this year. Existing provisions — including the higher TDS threshold on interest income introduced in the previous budget — continue to apply. Senior citizens should still review whether the New Tax Regime or Old Regime works better for their specific mix of pension, interest, and other income, since that comparison hasn't changed either.
Action Items — Your Post-Budget Checklist
A practical checklist to work through before your next filing deadline:
- Confirm your income tax slab and rebate calculation for FY 2026-27 — no change means no surprises, but double-check payroll and advance tax estimates reflect the correct, unchanged figures
- Update payroll and vendor payment systems for the revised TDS treatment of manpower supply services and the reduced LRS TCS rate
- Revise advance tax estimates if you have capital gains from share buybacks, given the shift to capital gains taxation
- Review eligibility for the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 if you have any undisclosed foreign income or assets — the window is time-limited
- Maintain updated documentation for crypto-asset transactions if applicable, given the new penalty structure for reporting failures
- If you export goods or claim GST refunds, review the amended Section 54(14) threshold and update your refund claim process
- Track CBDT and CBIC notifications through the year as procedural rules under the Income Tax Act, 2025 are notified in phases
Frequently Asked Questions
Did Union Budget 2026-27 change income tax slabs? No. The income tax slabs and rates under the New Tax Regime remain exactly as introduced in Budget 2025-26, with no revision for FY 2026-27.
Is income up to ₹12.75 lakh still tax-free for salaried individuals? Yes. The combination of the ₹75,000 standard deduction and the Section 87A rebate continues to make income up to ₹12.75 lakh effectively tax-free for salaried taxpayers under the New Tax Regime, unchanged from last year.
What is the Income Tax Act, 2025 and when does it apply? It is the new law replacing the Income-tax Act, 1961, effective from April 1, 2026. It restructures and simplifies the law but does not itself change tax rates; detailed procedural rules are being notified in phases.
Has the GST rate structure changed in this Budget? No. This Budget did not revise GST rates. The GST-related changes are procedural — covering place-of-supply rules for intermediary services, post-sale discount valuation, and removal of the minimum export refund threshold.
Do freelancers and small businesses have new presumptive taxation limits? No. Presumptive taxation turnover limits under Sections 44AD and 44ADA remain unchanged for FY 2026-27.
What is the Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026? It is a one-time, six-month voluntary disclosure window allowing eligible taxpayers to declare previously undisclosed foreign income or assets within specified thresholds, with immunity from penalty and prosecution.
How are share buybacks taxed now? Income from share buybacks is now taxed as capital gains in the hands of non-promoter shareholders, rather than as deemed dividend income, changing both the rate and timing of tax incidence.
Should I still consult a tax professional if nothing changed for my income bracket? Yes. Filing deadlines, TDS declaration formats, and GST refund procedures have changed procedurally even where rates haven't — a professional review helps ensure your compliance process matches the current rules, not last year's.
Conclusion
Union Budget 2026-27 is, by design, a year of consolidation rather than reform — tax rates and slabs are unchanged, but the compliance landscape has shifted meaningfully with the new Income Tax Act, 2025, revised filing timelines, simplified TDS/TCS procedures, a time-limited foreign asset disclosure window, and targeted GST relief for exporters and MSMEs.
The risk for most taxpayers isn't a missed rate change — it's applying last year's procedural assumptions to a year where the underlying law itself has changed. If you're unsure how any of these updates apply to your specific income, business structure, or compliance history, it's worth getting a professional review before your next filing deadline. Our team at CT Associates can help you assess exactly what FY 2026-27 means for your tax position — get in touch for a consultation.