Union Budget 2026: Finance Minister Nirmala Sitharaman Maintains Income Tax Slabs While Extending Filing Deadlines and Reducing TCS Rates

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Income Tax Rates Remain Unchanged

Finance Minister Nirmala Sitharaman announced no changes to income tax rates or slabs in her ninth consecutive Union Budget presentation on February 1, 2026. The decision comes after substantial tax relief measures delivered in Budget 2025, which made income up to Rs 12 lakh effectively tax-free under the new regime.

The existing tax structure under the new regime continues with six slabs, maintaining the 30 percent rate for income above Rs 24 lakh. This stability reflects the government's focus on policy continuity following last year's comprehensive overhaul of the personal taxation system.

Filing Deadlines Extended for Taxpayer Convenience

Sitharaman proposed extending the deadline for filing revised returns from December 31 to March 31 with payment of a nominal fee. Additionally, the government will stagger return filing timelines, allowing individuals filing ITR-1 and ITR-2 forms to continue submitting by July 31, while non-audit business cases receive extensions until August 31.

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These administrative changes aim to reduce compliance pressure on taxpayers and provide additional flexibility for correcting errors or updating income details without penalties.

Securities Transaction Tax Increased

The STT on futures increased to 0.05 percent from 0.02 percent, while options premium and exercise rates rose to 0.15 percent. This move contrasts sharply with capital market expectations for STT reductions and may impact trading costs for investors.

TCS Rates Reduced for Education and Medical Expenses

The Finance Minister announced relief for families supporting overseas education and medical treatment. TCS rates under the Liberalised Remittance Scheme for education and medical purposes dropped from 5 percent to 2 percent. Foreign tour package TCS was similarly reduced to a flat 2 percent rate.

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New Income Tax Act Implementation Confirmed

The New Income Tax Act will be implemented from April 1, 2026, with rules and revised forms to be notified soon. The rewritten legislation aims to simplify language, remove ambiguities, and reduce litigation in the tax system.