The Finance Minister Nirmala Sitharaman has introduced significant changes to the income tax slabs under the new tax regime in the Union Budget 2026. These new slabs will come into effect from April 1, 2026, for the financial year 2026–27. The restructuring of tax slabs aims to simplify the tax system and offer relief to taxpayers across different income brackets.

For the financial year 2026–27, Finance Minister Nirmala Sitharaman did not announce any changes to the existing income tax slabs under the revised tax regime. Income between Rs. 4 lakh and Rs. 8 lakh will be taxed at 5%, while income from Rs. 8 lakh to Rs. 12 lakh will be taxed at 10%. For earnings between Rs. 12 lakh and Rs. 16 lakh, the applicable tax rate is 15%. Income falling in the range of Rs. 16 lakh to Rs. 20 lakh will attract a 20% tax. The new tax regime offers lower tax rates as compared to the old tax regime.. Those earning between Rs. 20 lakh and Rs. 24 lakh will be taxed at 25%, and any income above Rs. 24 lakh will be subject to a 30% tax rate.

The Union Budget 2026–27 was structured around sustaining India’s growth momentum amid global uncertainties, while continuing structural reforms and encouraging long-term investment. A key focus remained infrastructure-led development, with public capital expenditure raised to a record Rs. 12.2 lakh crore, reinforcing the government’s commitment to connectivity, urban development, employment generation, and timely execution of large-scale projects.

Manufacturing and technological self-reliance formed another major pillar of the Budget. The government strengthened its semiconductor manufacturing programme and related ecosystem support to enhance domestic production, research, and supply chain resilience. . Measures were also outlined to improve access to critical minerals, supporting advanced manufacturing needs across electronics, defence, and clean-energy sectors.

Transport and logistics infrastructure received renewed emphasis through proposals aimed at improving rail connectivity, freight efficiency, inland waterways, shipbuilding, and container manufacturing. These initiatives are intended to lower logistics costs, support sustainable mobility, and improve supply-chain competitiveness.

For the financial year (FY) 2025-26 (Assessment Year 2026-27), the standard deduction for salaried employees and pensioners under the new tax regime is ₹75,000. This enhanced deduction, increased from ₹50,000, applies to the default tax regime (Section 115BAC), aiming to reduce taxable income.

Key Details on Standard deduction (FY 2025-26):

• New Tax Regime: The standard deduction is ₹75,000, applicable to taxpayers and pensioners.
• Old Tax Regime: The standard deduction remains at ₹50,000.
• Eligibility: It is available regardless of income level.
• Impact: Combined with the rebate under Section 87A, this deduction helps make income up to ₹12.75 lakh tax-free (₹12 lakh + ₹75,000) under the new regime.
• Other Deductions: Under the new regime, no other deductions like 80C or 80D are allowed, making the standard deduction a key benefit.

The deduction is directly reduced from the gross income, thereby lowering the taxable income.

Tax advantages for senior citizens

For FY 2025-26, senior citizens (60-80) and super senior citizens (80+) benefit from higher basic exemption limits of ₹3 lakh and ₹5 lakh respectively under the old tax regime. The new tax regime, enhanced by Budget 2025, makes income up to ₹12 lakh tax-free for seniors via rebates, with increased standard deduction to ₹75,000 for pensioners.

Key Tax Advantages For Senior Citizens (FY 2025-26/AY 2026-27)

• Higher Basic Exemption Limits (Old Regime):
• Senior Citizens (60-79 years): Income up to ₹3 lakh is exempt.
• Super Senior Citizens (80+ years): Income up to ₹5 lakh is exempt.
• Enhanced Rebate (New Regime - Budget 2025): Under Section 87A, senior citizens opting for the new tax regime can receive a rebate on taxable income up to ₹12 lakhs, making it effectively tax-free.
• Standard Deduction: Pensioners can claim a standard deduction of ₹75,000 against pension income under the new tax regime.
• Increased TDS Threshold on Interest: The limit for tax deducted at source (TDS) on interest from bank/post office deposits is raised to ₹1 lakh per year (from ₹50,000) for senior citizens.
• No Advance Tax: Senior citizens not having income from "Profits and Gains of Business or Profession" are exempt from paying advance tax.
• Exemption from Filing ITR: Seniors aged 75 and above (subject to conditions) are exempt from filing Income Tax Returns (ITR) if their pension and interest income are received in the same bank account.

Deduction (Old Regime) :

• Section 80D :Higher deduction for medical insurance premiums.
• Section 80TTB :Deduction of up to ₹50,000 on interest income from deposits.

It is important for senior citizens to compare both the old and new tax regimes to determine which offers the lowest tax liability based on their deductions and income sources.