Introduction to Budget 2026 Tax Framework
Union Budget 2026-27, presented on February 1, 2026, emphasized tax stability amid the transition to the new Income Tax Act effective April 1, 2026. No major slab changes were announced, aligning with the new Act’s rollout after parliamentary scrutiny. Focus shifted to compliance simplification, MAT reforms, and business relief—nearly 90 amendments introduced.
These measures target reduced litigation, digital compliance, and MSME support, while addressing arbitrage in buybacks and remittances. Businesses gain predictability, but must adapt to final tax structures.
Income Tax Slab Revisions: Continuity with Tweaks
Individual and HUF slabs remain unchanged from Budget 2025. New regime (default) offers rebate up to INR 25,000 liability (zero tax to ~INR 12 lakh). Standard deduction at INR 75,000 for salaried/pensioners; INR 50,000 old regime seniors.
Seniors (60-80): Exemption INR 3 lakh; super seniors (>80): INR 5 lakh (old regime). Family pension deduction INR 25,000. No new exemptions, but pre-filled ITRs from May 2026 ease filing.
| Category | Basic Exemption (Old Regime) | New Regime Threshold (Zero Tax) |
| <60 yrs | INR 2.5 lakh | Up to INR 12 lakh |
| 60-80 yrs | INR 3 lakh | Same + INR 75k std ded |
| >80 yrs | INR 5 lakh | INR 75k std ded pension |
This continuity reduces planning disruptions while broadening base via defaults.
Corporate Tax and MAT Changes: Final Tax Era Begins
MAT becomes final tax from April 1, 2026—no further credits post-March 31, 2026. Rate cut to 14% from 15%; legacy credits utilizable. Aimed at ending endless credit cycles.
Buyback taxation reformed: Deemed dividend tax removed; now capital gains for all shareholders. Corporate promoters: 22% effective; non-corporate: 30%. Prevents arbitrage vs dividends.
STT hiked: Futures 0.02% to 0.05%; options 0.1% to 0.15%. Impacts derivatives trading costs.
Startup and Angel Tax Relief Extended
Angel tax u/s 56(2)(viib) abolition sustained—no revival. Tax holiday (100% deduction) to March 2027; turnover relaxation. ESOP taxation deferred to sale; seed funding scheme boosted.
Section 54GB expanded for startup reinvestments. Digital compliance tools for TDS/GST automated. Boosts INR 1 lakh crore venture ecosystem.
GST and Indirect Tax Measures: MSME Focus
No rate changes; compensation cess to 2028. E-invoicing to INR 2 crore turnover (July 2026); QRMP quarterly filing to INR 5 crore turnover. Composition limit INR 1.5 crore traders; registration exemption INR 40 lakh intra-state.
RCM expanded to unregistered; ITC efficiency for tech/manufacturing startups. Anti-profiteering monitored via AI.
TDS and TCS Compliance Updates: Remittance Relief
Professional services TDS 1% (from 2%). LRS education/medical TCS 5% to 2%; overseas tours flat 2% (no threshold). Quarterly TDS mandatory >INR 10 crore turnover.
Digital incentives: 2% RuPay rebate; UPI Lite MDR-free to 2028. Reduces forex outflow burdens.
| TCS Category | Old Rate | New Rate (2026) |
| LRS Education/Medical | 5% | 2% |
| Overseas Tours | 5%/20% | Flat 2% |
| Others | 20% | Unchanged |
Capital Gains and Investment Taxation: Stability Prevails
LTCG 12.5% unchanged; exemption INR 1.25 lakh. STCG 20% unified. REITs/InvITs pass-through with 10% TDS. SGB redemption tax-free sustained.
ULIP >INR 2.5 lakh premium taxed as equity. Loss set-off simplification discussed but pending. Encourages long-term holdings.
| Gain Type | Rate | Exemption/Indexation |
| LTCG Equity | 12.5% | INR 1.25L; no index |
| STCG | 20% | None |
| Debt (post-23) | 12.5% | No indexation |
MSME and Startup Support: Credit and Formalization Push
Credit guarantee INR 5 crore micro-enterprises. Presumptive scheme: 6-8% digital turnover. INR 40 lakh GST exemption; PM Vishwakarma funding up. Women-led MSMEs: Priority loans/green incentives.
Digital MSME scheme for AI/cloud; green manufacturing subsidies.
| MSME Relief | Details |
| Turnover <INR 2cr | Presumptive exemption |
| Quarterly GST | <INR 5cr turnover |
| Green Loans | Low-interest priority |
Compliance Simplification Measures: Faceless and Digital
Pre-filled ITRs May 2026 (Aadhaar OTP). Faceless assessments 6 months max; ~90 amendments for clarity. INR 500 crore taxpayer portals/helplines. Revised ITR deadline extension proposed.
Customs personal imports duty 20% to 10%. Reduces litigation by 20-30%.
Implications for Businesses: Strategic Planning
Delhi NCR SMEs gain from GST relaxations; startups from angel/credit boosts. Corporates plan MAT utilization pre-April 2026. Salaried opt regimes via calculators.
Monitor CBDT notifications; update ERPs for e-invoicing/STT. These reforms prioritize voluntary compliance, cutting disputes.
Sector-Wise Impact Analysis
- Manufacturing: ITC efficiency, green incentives.
- Services: TDS cuts, presumptive ease.
- Exports: Refund timelines shortened.
- Investors: STT hikes offset by LTCG stability.
Budget 2026 balances revenue (target INR 25 lakh crore) with growth, setting stage for Income Tax Act 2026.
Contact +919034263307.
🌐 Visit: https://taxationlegaladvisor.in
