New income tax act will be effective from April 1
What's the story
Finance Minister Nirmala Sitharaman has announced that the new Income Tax Act will come into effect from April 1, 2026. The announcement was made during her Union Budget 2026-27 speech in Parliament today. The act was first notified in July last year and is aimed at simplifying and modernizing the country's tax system.
Tax reforms
Automated rule-based process for small taxpayers proposed
The Union Budget 2026-27 places a major emphasis on personal income taxation. The announcements are aimed at meeting taxpayer expectations and boosting economic activity. Sitharaman also proposed an automated, rule-based process for small taxpayers in the FY27 Budget. This proposal aligns with efforts to simplify tax compliance for smaller taxpayers.
Budget objectives
Budget 2026-27 focuses on 3 'kartavyas'
In her speech, Sitharaman outlined three 'kartavyas' or duties that the Budget 2026-27 focuses on. These are to accelerate and sustain economic growth while building resilience against volatile global dynamics, fulfill people's aspirations and build their capacity, and ensure equitable access to resources, amenities, and opportunities for all families, communities, regions, and sectors.
Previous reforms
Previous budget revamped personal income tax regime
In the previous Union Budget (2025-26), the government had majorly revamped the personal income tax regime. The move was aimed at providing relief to salaried individuals and increasing disposable incomes. Under this new regime, an annual income of up to ₹12 lakh, applicable to the average income of ₹1 lakh per month other than special rate income such as capital gains, was made tax-free. This limit was higher for salaried taxpayers due to a standard deduction of ₹75,000.
Tax expansion
Tax slabs widened under new regime
The Union Budget 2025 also widened tax slabs under the new regime. An annual income of up to ₹4 lakh was made tax-free, with the highest rate of 30% applicable only on incomes above ₹24 lakh. The revised tax rate structure under this regime was: ₹0-4 lakh- Nil, ₹4-8 lakh- 5%, ₹8-12 lakh-10%, and so on.