Income Tax Slabs 2026: Will Today’s Budget Quietly Rewrite Your Tax Bill?

Contents

Why Part B of the Budget Matters More Than the Big Speech Section 87A Rebate: The Engine Behind the ‘Zero Tax up to ₹12 Lakh’ Promise Capital Gains Tax: Why Investors Are Watching Closely Standard Deduction: The Simplest Relief Lever Old vs New Tax Regime: A Mathematical Choice, Not Emotional Old Income Tax Regime Slabs (Currently Applicable)Current Income Tax Slabs Under New Regime (FY 2025–26)Here’s What Happened Today and Why Traders Reacted Major Company and Sector Impact on Market Mood What Impact on Investors and Portfolios?What to Watch in Coming Days Bottom Line: Stability May Be the Real Gift

All eyes are on Part B of the Union Budget 2026 as Finance Minister Nirmala Sitharaman prepares to detail taxation proposals that directly shape household finances and investor returns. While headline speeches often focus on vision and growth, it is the fine print on income tax slabs, capital gains, and deductions that decides how much money actually stays in taxpayers’ pockets.

This year’s expectations are centred on Long-Term Capital Gains (LTCG), Short-Term Capital Gains (STCG), Section 87A rebate, and the standard deduction. For investors and salaried individuals alike, even a small tweak can alter financial planning, portfolio strategy, and consumption behaviour.

Tax experts say Budget 2026 is less about dramatic reform and more about incremental fine-tuning after last year’s big reset, which expanded the zero-tax threshold to ₹12 lakh under the new regime.

Why Part B of the Budget Matters More Than the Big Speech

For most taxpayers, Part B is where the real action lies. This is where decisions on:

Income tax slabs
Standard deduction
TDS/TCS rules
Capital gains taxation
are announced.

As one personal finance editor noted, “Taxpayers are looking for clarity and stability rather than surprises.” With nearly 70% of taxpayers already in the new regime, the government is expected to continue nudging adoption through simpler structures and fewer exemptions.

A cleaner system also means fewer disputes and tax notices, reducing compliance stress for both individuals and businesses.

Also Read : Budget 2026 Live: Nirmala Sitharaman Meets Droupadi Murmu Before Big Speech — Why Markets Are Staying Cautious

Section 87A Rebate: The Engine Behind the ‘Zero Tax up to ₹12 Lakh’ Promise

Many taxpayers misunderstand how the zero-tax promise works. It is not just slab rates but the Section 87A rebate that wipes out tax liability for resident individuals with total income up to ₹12 lakh under the new regime.

Key mechanics investors should note:

Rebate applies after tax calculation
Marginal relief prevents a sudden spike just above ₹12 lakh
Special-rate incomes like certain capital gains are excluded

This nuance is critical because LTCG and STCG do not always enjoy the same rebate benefits, which is why capital gains taxation remains in sharp focus today.

Capital Gains Tax: Why Investors Are Watching Closely

Capital gains tax directly affects equity investors, mutual fund holders, and property sellers. Currently:

LTCG on equities is taxed only beyond a threshold
STCG attracts higher rates
Special-rate gains may not qualify for full rebates

Even a minor change can shift trading behaviour. Lower capital gains taxes often encourage risk-taking and higher market participation, while tighter rules may push investors toward long-term holding strategies.

Brokerage circles say stability is more likely than aggressive cuts, as the government must protect tax revenues.

Standard Deduction: The Simplest Relief Lever

The standard deduction remains the easiest way to provide tax relief without complicating the system. It currently stands at:

₹75,000 under the new regime
₹50,000 under the old regime

There is strong market talk of a possible hike to ₹1 lakh. Such a move would immediately raise disposable income for salaried taxpayers and boost consumption without reopening multiple deduction categories.

Old vs New Tax Regime: A Mathematical Choice, Not Emotional

The old regime still offers HRA, home loan interest, and Section 80C benefits, but higher slab rates reduce its appeal unless deductions are substantial. The new regime, with lower rates and fewer exemptions, has become the default for many.

Data from tax platforms shows the new regime works best for incomes below ₹25 lakh, yet a meaningful minority still prefers the old system because their finances are structured around deductions.

Experts believe the government will strengthen the new regime rather than abolish the old one abruptly.

Old Income Tax Regime Slabs (Currently Applicable)

Under the old tax regime, taxpayers can claim multiple deductions (HRA, 80C, home loan interest, etc.), but slab rates are steeper.

Up to ₹2,50,000 — Nil
₹2,50,001 – ₹5,00,000 — 5%
₹5,00,001 – ₹10,00,000 — 20%
Above ₹10,00,000 — 30%

👉 This regime benefits those with large deductions, otherwise tax outgo is higher.

Current Income Tax Slabs Under New Regime (FY 2025–26)

The new regime offers lower rates but fewer deductions and is now the default system.

₹0 – ₹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%

Here’s What Happened Today and Why Traders Reacted

Markets opened cautiously ahead of the Budget. The BSE Sensex and Nifty 50 edged lower as traders avoided large bets before tax announcements.

Notable market cues:

Sensex slipped about 0.08%
Nifty fell around 0.18%
Metal stocks dragged sentiment
Banking majors like HDFC Bank and Axis Bank provided support

Investors remained defensive because capital gains tax changes can quickly impact valuations and trading volumes.

Major Company and Sector Impact on Market Mood

While this Budget is tax-centric, sectoral reactions matter. Pharma and auto names like Sun Pharma and Bajaj Auto saw selective buying, showing that investors are positioning for consumption-linked relief.

If disposable incomes rise:

FMCG demand may improve
Auto sales could strengthen
Financial stocks may benefit from credit growth

Thus, tax policy indirectly shapes corporate earnings expectations.

What Impact on Investors and Portfolios?

Possible investor impact includes:

Portfolio rebalancing if LTCG/STCG rules change
Higher equity participation if tax burden eases
Better cash flows for salaried investors via higher deductions

However, aggressive tax cuts may be limited due to fiscal constraints.

What to Watch in Coming Days

Post-Budget, markets will track:

Actual tax notifications
Eligibility fine print
Capital gains clauses

Often, the real story emerges after reading detailed provisions, not just speech headlines.

Bottom Line: Stability May Be the Real Gift

Budget 2026 may not deliver dramatic giveaways, but predictable rules, smoother compliance, and targeted relief could still improve investor confidence.

For taxpayers and investors alike, the message is clear: in modern tax policy, fine print often matters more than bold promises.