With the start of the new financial year 2026, there are several important changes to the income tax rules, as announced in the budget. These modifications include changes in tax exemptions, slabs, TDS limits, and more. Here's a detailed breakdown of the updates:

1. Tax Exemption Up to Rs 12 Lakh

• The tax exemption limit has been raised from Rs 7 lakh to Rs 12 lakh.
• Individuals with an annual income of up to Rs 12 lakh will not be required to pay income tax.
• Previously, income above Rs 7 lakh but below Rs 12 lakh attracted a tax of Rs 80,000. Now, no tax will be applicable for incomes up to Rs 12 lakh.
• Note: Even though no tax will be due, individuals must still file their income tax returns.

2. New Income Tax Slabs

• The tax slabs under the new income tax system have been revised. The structure now includes seven tax slabs:

  • Rs 0-4 lakh: Nil (No tax)
  • Rs 4-8 lakh: 5%
  • Rs 8-12 lakh: 10%
  • Rs 12-16 lakh: 15%
  • Rs 16-20 lakh: 20%
  • Rs 20-24 lakh: 25%
  • Above Rs 24 lakh: 30%

  The tax-free limit has been increased from Rs 3 lakh to Rs 4 lakh, and the highest tax rate of 30% will now apply to incomes exceeding Rs 24 lakh (previously, it was for incomes above Rs 15 lakh).

3. Standard Deduction

• A standard deduction of Rs 75,000 has been introduced for salaried taxpayers, further reducing taxable income.
• This means that taxpayers can now enjoy tax exemption up to Rs 12.75 lakh annually.

4. Changes in TDS (Tax Deducted at Source)

• The TDS limit on bank interest for senior citizens has been raised from Rs 50,000 to Rs 1 lakh.
• For others, the TDS limit on bank interest has been increased to Rs 50,000.
• The TDS limit for dividend income has been doubled to Rs 10,000.
• The TDS exemption limit for rental income has been increased to Rs 6 lakh per annum, benefiting landlords and potentially boosting the rental market.

5. Change in TCS (Tax Collected at Source) Rule

• The TCS limit for remittances sent abroad has been increased from Rs 7 lakh to Rs 10 lakh.
• This applies to remittances made for children’s education, family expenses, or other purposes.
• Additionally, businesses with sales over Rs 50 lakh will no longer need to deduct 0.1% TCS on their sales.

6. Extended Time for Filing Updated Tax Returns (ITR-U)

• The time limit for filing updated tax returns (ITR-U) has been extended from 12 months to 48 months from the end of the relevant assessment year.
• This provides taxpayers with more time to file returns without facing heavy penalties, easing concerns about delays.

7. Start-Up Benefits

• Start-ups established before 1 April 2030 can avail of 100% tax deduction on profits for three years out of the first ten years of their operation.
• This is aimed at encouraging entrepreneurship and innovation within India.

Conclusion

The new income tax rules aim to provide relief to taxpayers, especially middle-income earners, by increasing the tax exemption limits and revising the tax slabs. Senior citizens, in particular, stand to benefit from the higher TDS limits. These changes, combined with the extended filing period and support for start-ups, are designed to ease the tax burden and encourage growth in various sectors of the economy.