New Income Tax Rules 2026 in India: Key Changes & Impact

Overview of New Income Tax Rules 2026

The Government of India has introduced a series of significant changes to income tax rules effective from the Assessment Year 2026-27. These changes, stemming from the Union Budget 2025-26 and subsequent amendments, aim to simplify the tax structure, reduce the compliance burden, and provide relief to middle-class taxpayers.

In this detailed guide, The Ledger Company covers all the key changes and their practical impact on different categories of taxpayers in India.

Revised Income Tax Slabs for FY 2025-26 (AY 2026-27)

The new tax regime, which is now the default regime for all taxpayers, has been restructured with more favourable slabs:

New Tax Regime Slabs

Old Tax Regime (Optional)

The old regime remains available for those who wish to continue claiming deductions under Section 80C, 80D, HRA exemption, and other provisions. However, taxpayers must explicitly opt into the old regime; otherwise, the new regime applies by default.

Enhanced Standard Deduction

The standard deduction for salaried employees and pensioners has been increased:

• Salaried Employees: Standard deduction increased from ₹50,000 to ₹75,000 under the new regime.
• Pensioners: Family pensioners now receive an enhanced deduction of ₹25,000 (up from ₹15,000).
• Combined Impact: A salaried individual earning ₹12,75,000 per annum will effectively pay zero tax under the new regime after factoring in the standard deduction and rebate under Section 87A.

TDS and TCS Revisions

Several important changes have been made to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions:

Key TDS Changes

TCS on Foreign Remittance

TCS on foreign remittances under the Liberalised Remittance Scheme (LRS) has been rationalized. For amounts up to ₹10 lakh, no TCS applies. Beyond ₹10 lakh, the TCS rate is 5% for education (with loan) and 20% for other purposes. The threshold for TCS on overseas tour packages has been increased to ₹10 lakh.

Capital Gains Tax Changes

The capital gains tax framework has undergone significant restructuring in 2026:

• Short-Term Capital Gains (STCG): Listed equity and equity mutual funds continue to attract STCG at 20%. The holding period for short-term classification remains 12 months for listed securities.
• Long-Term Capital Gains (LTCG): LTCG on listed equity exceeding ₹1.25 lakh per annum is taxed at 12.5% without the benefit of indexation.
• Real Estate: LTCG on property sold after 2 years is taxed at 12.5% without indexation, replacing the earlier 20% with indexation. Taxpayers who purchased property before July 23, 2024, may compute tax under the old method and choose the lower amount.
• Unlisted Shares: LTCG holding period for unlisted shares has been reduced from 24 months to 12 months.

NRI Taxation Changes

Non-Resident Indians (NRIs) should be aware of these important changes:

• Deemed Residency: The rules for determining residential status remain stringent. NRIs earning more than ₹15 lakh in Indian-sourced income and not paying tax in any other country may be deemed resident.
• TDS on NRI Transactions: Banks and financial institutions must collect PAN or tax residency certificates from NRIs for all financial transactions above ₹50,000.
• DTAA Benefits: NRIs can continue to claim benefits under Double Taxation Avoidance Agreements (DTAA) but must now submit Form 10F electronically.

Compliance and Filing Deadlines

Key deadlines and compliance requirements for AY 2026-27:

• ITR Filing (Individuals): July 31, 2026
• ITR Filing (Audit Cases): October 31, 2026
• Advance Tax Installments: June 15, September 15, December 15, and March 15
• Updated Return (ITR-U): Can be filed within 48 months from the end of the relevant assessment year (expanded from 24 months).
• Form 26AS Reconciliation: Taxpayers are advised to reconcile Form 26AS and AIS before filing to ensure TDS credits match.

Impact on Salaried Individuals

For salaried individuals, the combined effect of revised slabs, enhanced standard deduction, and simplified compliance means tangible tax savings. An individual earning ₹15 lakh per annum will save approximately ₹30,000-₹40,000 in taxes compared to the previous year. Those earning up to ₹12.75 lakh will have zero tax liability under the new regime, providing significant relief to the middle class.

How The Ledger Company Can Help

Understanding the impact of new tax rules on your personal finances and business operations is critical for effective tax planning. The Ledger Company offers expert income tax advisory, return filing, advance tax computation, and NRI taxation services. Our experienced CA team ensures you choose the right regime, claim all eligible deductions, and file accurate returns on time. Schedule a consultation with our tax experts to optimize your tax strategy for 2026.