Key Points:
- Income tax slabs unchanged, disappointing salaried taxpayers.
- Revised return filing window extended to March 31, easing compliance.
- Sharp STT hike on derivatives, signaling push toward long-term investing.
India’s Budget 2026, presented Feb. 1 by Finance Minister Nirmala Sitharaman in Parliament, keeps income tax slabs unchanged, disappoints salaried taxpayers, but eases compliance by extending revised return deadlines and adjusting select transaction taxes.
India’s middle class saw no direct tax relief in the Union Budget 2026, as Finance Minister Nirmala Sitharaman chose stability over cuts, retaining existing income tax slabs under both the old and new regimes while introducing compliance-focused reforms.
Sitharaman, presenting her ninth consecutive budget, said the government’s priority was to reduce uncertainty and friction for taxpayers rather than alter rates. The budget was tabled on Sunday after she followed tradition by meeting President Droupadi Murmu earlier in the day.
No Change in Income Tax Slabs Disappoints Salaried Class
The Budget 2026 made no changes to income tax slabs in either regime. Under the old regime, income up to ₹2.5 lakh remains exempt, with rates rising to 30% above ₹10 lakh. The new regime also stays intact, with a zero-tax threshold of ₹4 lakh and a top rate of 30% above ₹24 lakh.
Expectations of relief for salaried taxpayers were high after last year’s changes, but those hopes went unmet. “No announcement regarding income tax slabs was made,” said Brijesh Goyal, chairman of the Chamber of Trade and Industry, calling the budget “a mixture of happiness and sadness.”
The finance minister also did not announce any change to the standard deduction, despite widespread expectations of an increase. Analysts said the absence of rate cuts signals the government’s confidence in last year’s overhaul and its focus on fiscal discipline.
Compliance Eased With Revised Return Deadline Extension
While tax rates stayed unchanged, Sitharaman proposed extending the deadline for filing revised income tax returns to March 31 from Dec. 31, with a nominal fee. Revised returns can now be filed up to 12 months after the end of the assessment year or before completion of the assessment, whichever is earlier.
“Return filing has been made more practical through staggered due dates and an extended revised-return window,” said Sakchi Jain, a chartered accountant and financial educator. She added that the measures “reduce uncertainty and compliance burden.”
The due date for filing original ITR-1 and ITR-2 returns remains July 31. The budget also softens prosecution provisions for certain procedural lapses and confirms that the simplified Income Tax Act, 2025, will take effect on April 1, 2026.
Other measures include removing deductions for interest expenses linked to dividend and mutual fund income, simplifying TDS processes for property transactions involving non-residents, and launching a one-time disclosure scheme for small taxpayers with undisclosed foreign assets.
STT Hike Signals Shift Toward Long-Term Investing
A major market-related proposal was the sharp hike in Securities Transaction Tax on derivatives. The STT on futures rises to 0.05% from 0.02%, while the levy on options jumps to 0.15% from 0.01%. The Income Tax Department clarified that STT rates for other instruments remain unchanged.
“The Budget’s hike in STT sends a clear signal that the government wants to slow down excessive short-term trading,” said Archit Gupta, founder and CEO of ClearTax. He cited more than 21 crore demat accounts and record monthly SIP inflows of over ₹31,000 crore in 2025 as evidence of a shift toward long-term investing.
Others cautioned about possible downsides. “The significant increase in STT on futures and options may adversely impact market depth and liquidity,” said Himanshu Sinha, partner at Trilegal.
Additional proposals include cutting tax collected at source on overseas tour packages, education, and medical expenses to 2%, offering tax holidays for foreign cloud service providers using Indian data centers, and exempting certain non-residents from minimum alternate tax.
Overall, experts said Budget 2026 favors stability and administrative reform over headline-grabbing tax cuts, leaving rate relief for another year.
