Budget 2026 Highlights — Complete Summary for Taxpayers | weandgst

Budget 2026 highlights bring major tax changes and important announcements for taxpayers in India, Union Budget 2026 arrived with a dual mandate: rationalise India’s tax structure for the middle class while simultaneously ensuring the formal economy continues to expand. For individual taxpayers — salaried employees in particular — the Finance Minister delivered a set of meaningful changes that collectively add up to one of the most employee-friendly budgets in recent years. This article compiles every key change that affects individual taxpayers, with clear explanations and practical takeaways.

“Budget 2026 did not just adjust numbers at the margin — it revisited frameworks that had been unchanged since the early 2000s and brought them decisively into the present.”

Budget 2026 Highlights – Key Tax Changes

Income Tax Updates in Budget 2026

1. Income Tax Slabs — New Regime (Default)

The new tax regime remains the default for FY 2026–27, but the government has fine-tuned the slabs to reduce the burden on middle-income earners. Here are the applicable rates:

2. Standard Deduction Increased to ₹75,000

In a move widely welcomed by the salaried class, the standard deduction has been raised from ₹50,000 to ₹75,000 under the new tax regime. This flat deduction is available to all salaried employees and pensioners without any documentation or proof of expenditure. For a taxpayer in the 20% bracket, the additional ₹25,000 deduction translates to a direct tax saving of ₹5,000 per year.

Note that under the old tax regime, the standard deduction remains at ₹50,000 — the enhancement exclusively benefits those who have opted for the new regime.

3. Allowances and Perquisites — The Big Overhaul

This is arguably the most comprehensive change in Budget 2026. Ten key perquisite limits have been revised upward, some by as much as 30 times. The full analysis of each change is covered in our dedicated article on New Allowances & Perquisites Rules 2026. The six headline changes are summarised below:

4. NPS Employer Contribution — Deduction Enhanced

The deduction limit for employer contributions to the National Pension System (NPS) has been revised upward. Employer NPS contributions are deductible under Section 80CCD(2), and this limit has been increased in alignment with revised salary structures. This makes NPS a more attractive component of the salary package, particularly for those in higher tax brackets who can benefit most from the deferred tax structure of NPS.

5. TDS Threshold Revisions — Less Deduction at Source

Several TDS thresholds have been revised upward in Budget 2026. The TDS threshold on interest income from banks and post offices has been raised, meaning small depositors will see less tax deducted at source. Similarly, thresholds for TDS on rent, professional fees, and e-commerce transactions have been rationalised, reducing compliance friction for individuals and small operators.

6. Capital Gains — Indexation Update

Budget 2026 brought further clarity on the indexation provisions introduced in the previous budget. For debt mutual funds and certain real estate transactions, the government has provided a grandfathering clause for assets held prior to April 2023, ensuring that long-term investors are not disadvantaged retroactively. The revised rules on capital gains indexation affect property sellers in particular — if you are planning to sell real estate, it is advisable to consult a tax professional to compute your liability under the updated framework.

7. GST — Simplified Compliance for Small Businesses

While primarily a budget focused on direct tax relief, Budget 2026 also announced several GST simplification measures. The composition scheme threshold has been raised, making it available to a wider range of small businesses. Quarterly return filing has been further streamlined, and the penalty structure for minor procedural defaults has been rationalised to remove disproportionate outcomes for small enterprises.budget 2026 highlights

8. Startup and MSME Provisions

Startups registered with DPIIT continue to benefit from the tax holiday provisions under Section 80-IAC. Budget 2026 has extended the sunset clause for eligible startups, allowing newly incorporated entities to claim the three-year tax holiday if incorporated before March 31, 2027. MSME credit guarantee schemes have also been expanded, with higher coverage limits to ease access to working capital. budget 2026 highlights

“The Budget’s biggest beneficiaries are those who had been left behind by two decades of unchanged exemption limits — parents, metro renters, and middle managers with company cars.”

What Budget 2026 Did Not Change

For completeness, it is worth noting what was not altered. The Section 80C limit of ₹1,50,000 — which covers PPF, ELSS, life insurance premiums, and home loan principal — remains unchanged and continues to apply only under the old tax regime. The basic exemption limit under the old regime remains at ₹2,50,000. The home loan interest deduction under Section 24(b) — ₹2,00,000 for self-occupied property — is also unchanged. budget 2026 highlights

Frequently Asked Questions-budget 2026 highlights

Related Reading on weandgst

These guides cover the Budget 2026 changes in depth — start with whichever is most relevant to your situation: budget 2026 highlights