The headline that Budget 2025 created and Budget 2026 maintained: salaried individuals earning up to ₹12.75 lakh under the New Regime pay zero income tax. Here is the precise calculation:

New Regime Slabs — FY 2026-27 (Unchanged from FY 2025-26)

Plus 4% Health and Education Cess on the final tax amount.

The Income Tax Act 2025 came into effect on April 1, 2026 — replacing the Income Tax Act 1961 after 65 years. The substance of most provisions is unchanged — the rules are the same, reorganised and rewritten in cleaner language. But three specific changes within the ITA 2025 framework are practically meaningful for middle-class taxpayers:

1. “Tax Year” Replaces “Financial Year” + “Assessment Year”

Under ITA 1961, the same period had two labels: Financial Year (when income was earned) and Assessment Year (when it was assessed). This created constant confusion — “which year do I tick in this form?” Under ITA 2025, a single term — Tax Year — covers the April to March period. Tax Year 2026-27 is the period April 2026 to March 2027. One term, one period, no ambiguity. This is a small change that reduces a genuine friction point in compliance.

2. Form 15G / 15H — Submit Once, Applied Everywhere

Previously, if you wanted to prevent TDS on FD interest, you had to submit Form 15G or 15H to each bank, each fixed deposit, each institution separately. Miss one — TDS gets deducted. Under the Budget 2026 / ITA 2025 change, CDSL and NSDL (the two depositories) can now receive a single submission of Form 15G/15H and forward it to all relevant institutions. For senior citizens managing FDs across multiple banks — this is a genuine, tangible relief. One submission instead of five or six.

3. Lower / Nil TDS Certificate — Now Automated

Previously, taxpayers whose total income was below the taxable threshold could apply to their jurisdictional AO for a certificate authorising deductors to deduct TDS at a lower or nil rate. This required an offline application, documentation, and often weeks of waiting. Budget 2026 introduces an automated, rule-based process for this certificate — system checks eligibility and issues the certificate without manual AO intervention. Faster, more predictable, less dependent on local office queues.

Tax Collected at Source (TCS) is deducted when you spend money — on travel, foreign exchange, education abroad. It is not a final tax but a credit you claim in your ITR. The issue is cash flow: high TCS rates mean large amounts tied up with the government until refund season. Budget 2026 reduced several TCS rates materially:

TCS is refundable via ITR — but it blocks liquidity for months. If you book a ₹4 lakh international holiday for your family, the previous TCS at 20% would have been ₹80,000 locked until your refund arrives. At the new flat 2%, TCS is ₹8,000. The holiday still costs the same — but ₹72,000 less is blocked with the government. This is a genuine, tangible middle-class relief for anyone who travels internationally or has children studying abroad.

There are several areas where middle-class expectations — fuelled by pre-budget speculation — were not met:

The unchanged provisions are not failures — they are simply not changes. Many of these limits have been unchanged for years and genuinely do need revision (Section 80C has not been revised since 2014). But Budget 2026 chose to focus on structural simplification rather than limit increases.

Not all Budget 2026 changes are positive for everyone. For Futures and Options traders, Securities Transaction Tax (STT) has been increased:

For high-frequency futures traders, STT is a significant cost that directly reduces net returns. The increase from 0.02% to 0.05% on futures turnover may seem small — but on a ₹10 crore monthly futures turnover (common for active traders), the monthly additional STT cost is ₹30,000. Annually: ₹3.6 lakh in additional STT. Traders who operate on thin margins should revise their P&L projections factoring in the new rate from April 1, 2026.

Example 1 — The Family That Books an International Holiday

The Sharma family — Delhi — books a 10-day Europe tour for ₹5 lakh (two adults, one child). Travel agent collects TCS.

The TCS is refundable — both old and new rates would have come back as refund. But the cash flow difference is significant. ₹1 lakh blocked for 6–10 months (until ITR refund) vs ₹10,000 is a material difference for middle-class families planning international holidays.

Example 2 — Senior Citizen With 4 FDs in 3 Banks

Mrs. Patel, 72, has FDs in SBI, HDFC, and Post Office — four FDs in total. Her tax after 80TTB (₹50,000) and standard deduction (₹75,000) is zero. Every year she visited each institution separately to submit Form 15H — three bank visits, one post office visit, 4 separate forms.

Under the Budget 2026 change, she submits Form 15H once through the NSDL/CDSL portal. It gets forwarded to all institutions. Zero bank visits. This is not a large-rupee saving — but for a 72-year-old managing fixed deposits independently, it is a meaningful simplification of an annual compliance burden.

Example 3 — IT Professional, ₹14 Lakh Salary, Zero Tax

Rahul, software developer, ₹14 lakh CTC including variable pay. Base salary component: ₹12.5L per year. No significant deductions beyond standard deduction. New Regime: taxable income ₹11.75L — fully within 87A rebate — zero tax. This has not changed from FY 2025-26 — Budget 2026 maintained this benefit unchanged. Rahul’s tax planning question for FY 2026-27 is identical to FY 2025-26.
🔗 New vs Old Regime — Calculations for FY 2026-27

One provision that received almost no media coverage but is genuinely meaningful: interest paid by Motor Accident Claims Tribunals to accident victims and their families is now exempt from income tax.

Previously, MACT awards carried interest from the date of the accident to the date of payment — often a period of several years during which litigation proceeds. This interest component was taxable as income in the year of receipt, sometimes creating a significant and unexpected tax demand for families already dealing with the trauma of an accident.

The Budget 2026 exemption — effective from AY 2026-27 — removes this. The principal compensation was already not taxable; now the interest on delayed MACT payments is also exempt. This is a quiet but deeply humane provision that corrects a genuine injustice in how accident victims were taxed.

The Statement of Financial Transactions (SFT) penalty for non-compliance has been capped at ₹1 lakh (Budget 2026). Previously, penalties for late or incorrect SFT filing had no upper limit, creating disproportionate risk for small businesses and cooperative societies that act as SFT filers.

Under ITA 2025 Section 508 (previously Section 285BA under ITA 1961), entities like banks, registrars, brokers, and mutual fund AMCs must file SFT. The ₹1 lakh cap ensures that a procedural delay or minor error does not result in an unlimited penalty — a proportionality correction that benefits smaller reporting entities.

1. Calculate your FY 2026-27 tax — using the unchanged New Regime slabs. If gross salary ≤ ₹12.75 lakh, zero tax. Above this, compute with actual deductions under both regimes. Declare to employer in April.
2. Senior citizens — submit Form 15H centrally — once CBDT notifies the new CDSL/NSDL portal functionality. One submission covers all FDs across all institutions. Watch for the official launch notification.
3. ITR-3 / ITR-4 filers — you have until August 31 for FY 2025-26 ITR. But start organising your GST reconciliation and advance tax credit details now — August 31 is not a reason to start in August.
4. Planning international travel? — Book via registered tour operators. TCS is now 2% flat. Collect the TCS certificate — claim credit in your ITR to get the refund.
5. F&O traders — revise your trading cost model. STT on futures is now 0.05%. Adjust your per-trade cost calculation and margin requirements accordingly.
6. NRIs with undisclosed foreign assets — the 6-month Foreign Asset Disclosure window is a one-time opportunity. Consult a CA with international tax experience before the window closes. Details of the FAST scheme are at the CBDT notification — verify and act before the deadline.