New Income Tax Act will start from April 1, 2026: Check Tax slab

New Income Tax Act: In Union Budget 2026 speech, Finance Minister Nirmala Sitharaman confirmed that the Income Tax Act, 2025 will officially replace the legacy 1961 Act starting April 1, 2026.

This marks a monumental shift in India’s fiscal history, moving from a six-decade-old framework to a streamlined, digital-first legislation.

New Income Tax Act:

The Death of “Assessment Year” (AY):

Perhaps the most significant change for the average person is the removal of the confusing “Previous Year vs. Assessment Year” terminology.

Old Way: Income earned in 2025-26 was taxed in “Assessment Year” 2026-27.

New Way: There is now only a single “Tax Year.” The year in which you earn the money is the same year for which you are taxed. This aligns India with global standards and simplifies filing.

The Finance Minister highlighted that the new Act has been pruned to reduce litigation and complexity:

Section Count: Reduced from over 800 to approximately 536.

Chapters: Slashed from 47 to 23.

Language: Rewritten in plain English to reduce the need for expensive tax consultants for basic filings.

Tax Relief & Slabs (Effective for FY 2026-27):

While the new Act provides the legal framework, the Budget also maintained the aggressive tax relief introduced recently to pull more people into the New Tax Regime:

Income Slab and Tax Rate (New Regime):

Up to ₹4 Lakh – Nil

₹4 Lakh – ₹8 Lakh 5%

₹8 Lakh – ₹12 Lakh 10%

₹12 Lakh – ₹16 Lakh 15%

₹16 Lakh – ₹20 Lakh 20%

₹20 Lakh – ₹24 Lakh 25%

Above ₹24 Lakh 30%

The “₹12 Lakh” Rule: Under the New Tax Regime, individuals earning up to ₹12 lakh pay zero tax due to the enhanced Section 87A rebate. For salaried employees, this limit effectively rises to ₹12.75 lakh when including the standard deduction.

Digital & “Faceless” 2.0:

The Act formally embeds Faceless Assessment and AI-driven processing as the primary modes of interaction. This aims to:

Eliminate the need for physical visits to tax offices.

Speed up refunds, with a target to process most returns within 24–48 hours.

Consolidate all TDS (Tax Deducted at Source) provisions into one easy-to-read table.

Transition Period:

Current Earnings (Until March 31, 2026): Will still be governed by the old 1961 Act.

New Earnings (From April 1, 2026): Will be the first to fall under the new 2025 Act.

Also Read: Union Budget 2026: Nirmala Sitharaman may break 75 year tradition