Income Tax Slabs for Assessment Year 2026–27: Key Changes Experts Want in Old & New Tax Regimes

As the Union Budget 2026 approaches, the anticipation among taxpayers and financial experts is palpable. With the presentation scheduled for February 1, 2026, all eyes are on Finance Minister Nirmala Sitharaman to see if she will introduce measures to alleviate the burden of rising living costs. While the New Tax Regime has already introduced simplified slabs and lower rates for many, experts argue that further rationalization is needed. You can explore more about managing your finances during such transitions at CreditCares Financial Planning. A strong foundation in Effective Debt Management is also vital as tax laws evolve.

This section delves deep into the current Income Tax Slabs, the specific demands for the Old and New Tax Regimes, and the strategic shifts experts are urging for Budget 2026.

Current Landscape: Income Tax Slabs for FY 2025-26 (AY 2026-27)

Before analyzing the requested changes, it is crucial to understand the existing tax structure. For the Financial Year 2025-26, the New Tax Regime offers a tiered structure designed to lower tax liability. For a broader view of official banking and monetary updates, visit the Reserve Bank of India (RBI). Understanding these slabs is essential for those looking into Personal Loan Tips to ensure they stay within their budget.

New Tax Regime Slabs

The revised slab structure for FY 2025-26 aims to provide relief through wider brackets. Below is the breakdown of the tax rates applicable to income levels under this regime:

Old Tax Regime Slabs

For taxpayers who prefer retaining their deductions, the Old Tax Regime follows a different structure. This regime is often favored by those with significant investments in tax-saving instruments. If you are balancing tax savings with credit use, our guide on Credit Card Management is a must-read.

Expert Demands for Budget 2026: Bridging the Gap

While the current slabs provide clarity, the economic reality of rising housing expenses and inflation has triggered fresh demands for tax relief. Experts like Abhishek Soni (CEO, Tax2win) have highlighted several key areas where Budget 2026 could introduce meaningful changes. Those interested in the underlying economic trends can follow our Financial News and Updates.

1. Reviving Home Loan Benefits in the New Regime

One of the most significant criticisms of the New Tax Regime is the absence of deductions for home loan interest. This exclusion makes homeownership less attractive. To explore current housing finance options, you can visit HDFC Bank Home Loans. Homeowners should also be aware of How Loans Impact Credit Scores over time.

• The Demand: Experts suggest allowing limited home loan benefits under the new regime.

• The Rationale: Reintroducing these benefits would support first-time homebuyers and create a better balance between the old and new regimes.

2. Increasing the Standard Deduction

The standard deduction is a flat reduction from salary income, currently set at Rs 75,000 under the new tax regime. However, given the trajectory of inflation, there is a strong push to revise this figure. For those looking to grow their savings further, check out Investment Strategies for Beginners.

• The Demand: Experts are calling for the Finance Minister to increase the standard deduction to Rs 1 lakh.

• Special Considerations: There is also a specific demand for a higher standard deduction for defense personnel to acknowledge their unique service conditions.

3. Revising the Section 80C Limit

Section 80C of the Income Tax Act, 1961, allows for a deduction of up to Rs 1.5 lakh. For comprehensive tax planning advice, see the State Bank of India (SBI) Tax Savings page. Maximizing these limits is a vital part of Long-term Wealth Building.

• The Demand: Experts propose increasing this limit to Rs 2.5 lakh.

• The Rationale: Raising the limit would encourage long-term savings and provide relief to middle-income taxpayers.

4. Tax Rationalization for Fixed Income and Retirees

For retirees, post-tax yields on fixed-income instruments like FDs pose a major challenge. Check out the latest Fixed Deposit Rates at ICICI Bank for comparison. Planning for a secure future also requires comprehensive Insurance Knowledge.

• The Demand: Targeted concessions or rationalization for fixed income taxation.

• The Impact: Such measures would provide relief to senior citizens struggling with the gap between interest income and inflation.

5. Extending Section 87A Rebate to Equity Capital Gains

Currently, the rebate under Section 87A does not apply to capital gains from equity investments. Small investors often look toward Microfinance Insights to find alternative growth opportunities for their capital.

• The Demand: Abhishek Soni suggests extending the rebate to cover equity capital gains to support small retail investors.

• The Rationale: This change would promote wider participation in the capital markets.

6. Clearer Frameworks for NRIs

Non-Resident Indians (NRIs) represent a growing segment of the Indian capital markets. For tailored cross-border banking solutions, Axis Bank NRI Services offers detailed frameworks. NRIs can also learn about maintaining their financial health through Global Credit Management.

• The Demand: Experts argue for simpler, clearer, and more consistent frameworks for NRIs.

• The Goal: Reducing friction in cross-border regulations will encourage long-term participation.

7. Permanent Shift of ITR Deadline

The annual scramble to file Income Tax Returns (ITR) by July 31 often results in confusion. Staying organized with your Financial News and Updates can help you avoid last-minute stress.

• The Demand: A permanent shift of the due date to August 31.

• The Benefit: This adjustment would improve compliance rates and reduce stress for taxpayers.

Conclusion

As the Finance Minister prepares for Budget 2026, taxpayers want a regime that acknowledges inflation and supports housing. Whether it is through a hike in the standard deduction or a revision of the 80C limit, these changes could significantly alter the financial landscape. For more tips on managing your money, visit CreditCares.in.

FAQs: Income Tax Slabs & Budget 2026

Q1: What is the current standard deduction?

A: It is currently Rs 75,000 under the new regime. Experts want it raised to Rs 1 lakh.

Q2: Are there home loan benefits in the new regime?

A: No, but experts are urging the government to introduce them to help First-time Homebuyers.

Q3: What is the proposed Section 80C limit?

A: Experts are demanding an increase from Rs 1.5 lakh to Rs 2.5 lakh to support Wealth Building.

Q4: Will the ITR filing deadline change?

A: Experts suggest shifting it to August 31 to improve Tax Compliance.