Every year, the Union Budget reshapes India's financial landscape. Budget 2026 brought significant changes to income tax slabs, GST rates, and business incentives. Here is everything salaried employees, self-employed professionals, SME owners, and NRIs need to know — translated from budget-speak into plain English.
Why Budget 2026 Matters More Than Usual
India's fiscal year 2026–27 budget was presented against a backdrop of strong GDP growth, an expanding middle class, and pressure to simplify a tax code that has long been criticised for its complexity. The government's dual mandate — stimulating consumption while managing the fiscal deficit — shaped every announcement. For taxpayers, the results are a mix of genuine relief and new compliance obligations.
Whether you are a salaried professional trying to choose between the old and new tax regimes, a business owner planning your next financial year, or an NRI navigating India's tax treaty landscape from the United States, this guide breaks down what changed and what it means for your wallet.
New Income Tax Slabs 2026: Old Regime vs New Regime
The biggest change for individual taxpayers in Budget 2026 is the revision of income tax slabs under the new tax regime, which is now the default regime for all taxpayers. The government has made the new regime more attractive by raising the basic exemption limit and restructuring the slabs.
New Tax Regime (Default) — FY 2026–27
| Income Range | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Key relief: With the Section 87A rebate, individuals earning up to ₹12 lakh in the new regime effectively pay zero income tax. This is the highest-ever basic exemption threshold in Indian tax history.
Old Tax Regime — Still Available by Choice
The old regime with its existing slab structure remains available for taxpayers who wish to claim deductions under Section 80C, 80D, HRA, home loan interest, and similar provisions. The decision between regimes should be made based on your specific deductions. As a general rule of thumb: if your total eligible deductions exceed ₹3.75 lakh, the old regime may still deliver a lower tax outgo.
Standard Deduction Raised for Salaried Employees
The standard deduction for salaried employees and pensioners has been increased to ₹75,000 under the new tax regime (up from ₹50,000). This change benefits mid-to-senior level professionals significantly. Family pensioners also see their standard deduction raised to ₹25,000.
Key GST Changes in Budget 2026
While GST changes are typically decided by the GST Council rather than the Union Budget, several GST-adjacent measures were announced or implemented alongside Budget 2026:
- GST simplification for MSMEs: Quarterly return filing (QRMP) thresholds raised, reducing compliance burden for small businesses with turnover up to ₹5 crore.
- Input Tax Credit (ITC) tightening: New validation rules for ITC claims on high-value capital goods to reduce fraudulent claims.
- E-invoicing expanded: Mandatory e-invoicing threshold lowered to ₹1 crore turnover, bringing more businesses into the digital compliance ecosystem.
- GST on online gaming: 28% GST on online gaming at face value of bets continues with enhanced enforcement.
What Budget 2026 Means for Businesses & SMEs
MSME Credit & Capital Support
Budget 2026 announced significant enhancements to credit guarantee schemes for MSMEs, with the corpus of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) expanded. Collateral-free loans up to ₹2 crore are now available for well-performing MSMEs, up from ₹1 crore. For India's 63 million MSMEs — the backbone of employment and GDP — this is meaningful relief.
Corporate Tax: No Change, But Clarity on MAT
The corporate tax rate remains at 22% for domestic companies (15% for new manufacturing companies). However, Budget 2026 introduced amendments clarifying the applicability of Minimum Alternate Tax (MAT) to new-age businesses, particularly those in digital services and platform economics — an area that had previously generated significant litigation.
Startup India: Extended Benefits
The Section 80-IAC tax holiday for eligible startups — providing 100% tax deduction on profits for 3 consecutive years within the first 10 years of incorporation — has been extended. The deadline for incorporation to qualify has been pushed forward, giving a new window for 2026-founded startups to benefit.
Capital Gains Tax: What Changed
Budget 2026 brought important changes to capital gains taxation that affect equity investors, mutual fund holders, and real estate sellers:
- LTCG on equity: Long-term capital gains on listed equities above ₹1.25 lakh remain taxed at 12.5% (introduced in the previous budget) with no indexation benefit.
- STCG on equity: Short-term capital gains on equity remain at 20% following the prior revision.
- Real estate LTCG: Indexation benefit removal for real estate remains as announced previously — sellers can choose between 12.5% without indexation or 20% with indexation for properties acquired before July 23, 2024.
- Debt mutual funds: Gains from debt funds continue to be taxed as per the income tax slab rate, regardless of holding period.
Action point for investors: Review your portfolio's holding periods before any sale. Tax-loss harvesting before March 31 and asset-location strategy between equity, debt, and real estate can significantly reduce your effective capital gains tax burden.
Budget 2026 for NRIs: Key Changes
Non-Resident Indians — particularly those in the United States — have specific tax obligations and opportunities shaped by Budget 2026:
- TDS on NRI property sales: The TDS rate on property purchases from NRIs remains at 20% on LTCG portion, but the compliance process for lower TDS certificates has been simplified.
- DTAA benefits clarified: The government issued new guidelines on the applicability of Double Taxation Avoidance Agreements, particularly for NRIs earning both India-source and US-source income. The DTAA with the US remains one of India's most important bilateral tax treaties.
- NRI investment limits relaxed: FDI limits in certain key sectors have been relaxed, benefiting NRI investors looking to invest in Indian real estate and financial services.
Sector-Specific Budget Highlights
Healthcare & Pharma
Significant allocation increases for healthcare infrastructure, with customs duty reductions on cancer treatment drugs and medical equipment. For pharma and medtech businesses, expanded PLI (Production-Linked Incentive) scheme benefits offer meaningful cost advantages.
Infrastructure & Real Estate
Capital expenditure allocation increased again, continuing India's infrastructure push. This has direct implications for real estate markets in tier-1 and tier-2 cities, and for businesses in construction materials, logistics, and allied sectors.
Agriculture & Rural Economy
PM Kisan allocation enhanced, with expanded support for natural farming and digital agriculture. Rural consumption is expected to see a lift — good news for FMCG and consumer goods businesses with rural distribution.
What Should You Do Now?
Here is a practical post-budget action checklist for different taxpayer categories:
Salaried Employees
- Compare your tax liability under old vs new regime with your actual deductions for FY 2026–27.
- Submit your regime choice to your employer before the first salary of April 2026.
- If switching to the new regime, review whether to discontinue traditional tax-saving investments (PPF, ELSS, etc.) that made sense primarily for tax purposes.
Business Owners
- Assess eligibility for enhanced MSME credit guarantee benefits.
- Review e-invoicing compliance obligations if your turnover is near or above ₹1 crore.
- Plan capital purchases to maximise depreciation benefits in FY 2026–27.
Investors
- Review equity portfolio for tax-efficient rebalancing opportunities.
- Assess debt vs equity allocation given the changed tax treatment of debt funds.
- Consider sovereign gold bonds and NPS as tax-efficient alternatives.
Need Help Navigating Budget 2026?
Our tax experts at Artham Advisory have helped hundreds of individuals and businesses optimise their tax strategy post-budget. Book a free 30-minute consultation.
Book Free Consultation →Conclusion
Budget 2026 continues India's push towards tax simplification while expanding the incentive framework for businesses, startups, and investors. The higher basic exemption limit will provide genuine relief to the middle class, while the expanded MSME credit architecture signals continued government commitment to India's enterprise backbone. As always, the devil is in the details — and getting your specific situation analysed by a qualified tax professional before making financial decisions remains the most important step.