Finance Minister Nirmala Sitharaman has presented the Union Budget 2026, bringing major relief for the common people. The government has made significant changes to the Direct Tax System, directly benefiting salaried employees and middle-class families. Under the new rules effective from April 1, 2026, people earning up to ₹12.75 lakh annually will not have to pay any income tax. The complex old laws have been replaced by a simplified New Income Tax Act 2025.
New Income Tax Slabs and Salary Rules
The government has made the New Tax Regime more attractive for everyone. The tax rebate limit has been increased, meaning annual income up to ₹12 lakh is now completely tax-free. For salaried employees, a Standard Deduction of ₹75,000 has been announced.
When you combine these two benefits, any employee earning up to ₹12.75 lakh per year will pay Zero Tax. Additionally, the old Income Tax Act of 1961 has been replaced by the New Income Tax Act 2025, which has removed nearly 50% of the old complicated sections to make tax filing easier for the common man.
TDS and TCS Rates Reduced for Common Expenses
To help people save money and improve cash flow, the government has slashed TDS and TCS rates on several daily transactions. The TDS on house rent and insurance commissions has been reduced from 5% to just 2%. Also, sending money abroad for studies or going on foreign tours will now attract lower taxes.
| Category | Old Rate | New Rate |
|---|---|---|
| TDS on House Rent (Sec 194-IB) | 5% | 2% |
| Insurance Commission TDS | 5% | 2% |
| TCS on Education Remittance | 5% | 2% |
| TCS on Overseas Tour Packages | Higher rates | 2% |
Relief for NRIs and Startups
Indians working abroad (NRIs) have received special attention in this budget. The limit for NRIs to invest in the Indian share market has been increased from 10% to 24%. The government has also removed the heavy penalties for small mistakes (up to ₹20 lakh) in disclosing foreign assets.
For startups and investors, the controversial ‘Angel Tax’ has been completely abolished. The government has also introduced a new online tool to help claim Foreign Tax Credit easily, ensuring that people do not have to pay tax twice on the same income.
