No Tax up to ₹12 Lakh 2026 Income Tax Rules Explained
2026 Income Tax Rules What Every Citizen Should Know
India's income tax system features two regimes:
the old regime (with deductions and exemptions) and the new (default) regime (simpler, lower rates but limited deductions).
Key changes from the Union Budget 2025 apply to FY 2025-26 (income earned April 2025–March 2026, returns filed in 2026–27).
No major slab changes are confirmed yet for FY 2026-27, but a significant reform—the new Income Tax Act, 2025—will replace the 1961 Act from April 1, 2026 (FY 2026-27 onward).
This simplifies language, reduces sections, and aims for clarity without altering core rates/slabs substantially.
Income Tax Slabs and Rates (New Regime - Default for FY 2025-26 Onward)Revised in Budget 2025 for lower taxes on middle incomes
Starting April 1, 2026, India’s tax system will undergo major reforms: individuals earning up to ₹12 lakh annually will pay no income tax under the new regime, while higher incomes will face a simplified slab structure.
Nil tax up to ₹12 lakh: Full rebate ensures no tax liability for individuals earning up to ₹12 lakh.
Salaried taxpayers benefit slightly more: With a higher standard deduction of ₹75,000, effective nil tax applies up to ₹12.75 lakh.
Marginal relief applies if income just crosses ₹12 lakh, preventing sudden jumps in tax burden.
Key Procedural & Compliance Changes
TDS (Tax Deducted at Source) thresholds revised:
Bank deposit interest exemption raised to ₹50,000 for non-senior citizens and ₹1 lakh for senior citizens.
Rent payments: No TDS if monthly rent is up to ₹50,000 (₹6 lakh annually).
GST rationalisation: 2026 will be the first full year of the consolidated GST structure introduced in late 2025. Focus shifts from rate cuts to simplification and compliance ease.
Customs duty rationalisation: Expected to reduce complexity in imports and exports, benefiting individuals indirectly through lower consumer prices.
Impact on Individuals
Middle-income earners (₹8–12 lakh): Big winners, as they move into the nil-tax zone.
Salaried professionals: Extra relief via standard deduction, making take-home pay higher.
High-income earners (>₹24 lakh): Still taxed at 30%, but slab simplification reduces confusion.
Senior citizens: Higher TDS exemption on interest income means less paperwork and fewer refunds.
Renters/landlords: TDS compliance burden eased for moderate rental values.
Rebate u/s 87A: Up to ₹60,000 → zero tax liability up to ₹12 lakh income.
Standard Deduction: ₹75,000 for salaried/pensioners → effective zero tax up to ₹12.75 lakh for salaried.
Effect: Major relief for middle-class (up to ₹12–15 lakh earners save significantly). Encourages switching to new regime.
Key Overhaul Starting April 1, 2026: New Income Tax Act, 2025Replaces 1961 Act simpler, shorter (half the length), plain language.
Introduces "Tax Year" (replaces Previous/Assessment Year).
Clearer definitions, reduced litigation, digital focus.
No major changes to slabs/rates in draft; maintains new regime benefits.
Effect: Easier compliance, less disputes. Taxpayers should prepare for updated forms/processes from FY 2026-27.
Other Notable Changes (Ongoing from 2025)Limited Deductions in New Regime: Standard deduction (₹75,000), employer NPS contribution, family pension deduction (₹25,000).
Surcharge & Cess: Unchanged; 4% Health & Education Cess on tax.
TDS/TCS Rationalization: Higher thresholds, reduced rates for ease.
Crypto/VDAs: New reporting requirements from 2026.
Perquisites: Some (e.g., overseas medical travel) tax-free from 2026.
New Income Tax Slab -
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