Budget 2026 Personal Finance Highlights: What Actually Changed for Your Wallet

TL;DR

• The new tax regime under Section 115BAC continues as the default; the rebate under Section 87A is preserved for incomes up to the threshold notified.
• Standard deduction for salaried individuals and pensioners remains at Rs. 75,000 under the new regime as per current rules.
• Capital gains tax structure stays broadly as restructured in earlier budgets, with LTCG on equities taxed at 12.5% beyond the Rs. 1,25,000 annual exemption.
• TDS and TCS thresholds were rationalised further, especially for rent, professional fees, and foreign remittances under the Liberalised Remittance Scheme.
• NPS Vatsalya, the children's pension scheme, gets expanded contours and tighter integration with Section 80CCD benefits.
• Home loan interest deduction under Section 24(b) continues at Rs. 2,00,000 for self-occupied property as per current rules.

What this means in plain terms

The Union Budget 2026 is not a regime-flipping budget. It is a tightening budget. Slabs are stable, but the government has moved several levers around compliance, capital gains reporting, and digital tax administration. The signal is clear: the new regime is now the centre of gravity, and most personal finance decisions over the next twelve months should be calibrated to it.

If you have been holding on to the old regime out of habit, this is the year to model both side by side. The deduction-heavy approach still makes sense for a slim slice of taxpayers, but for most salaried Indians with a 9-to-6 job, modest investments under Section 80C, and a typical home loan, the new regime continues to be lighter on paperwork and competitive on tax.

Tax slab and rebate continuity

Slabs under the new regime

The slab structure under Section 115BAC remains broadly stable as announced. The zero-tax effective income, after rebate under Section 87A, continues at the threshold notified for FY 2026-27. The marginal relief mechanic also continues, so income just above the rebate ceiling does not trigger a sudden tax cliff.

Standard deduction

Salaried taxpayers and pensioners continue to get a standard deduction of Rs. 75,000 under the new regime as per current rules. Family pensioners get Rs. 25,000. This is automatic — no proof needed.

Surcharge

The highest surcharge rate under the new regime remains capped at 25% for incomes above Rs. 2 crore, lower than the 37% that the old regime imposed pre-rationalisation.

Capital gains and investment taxation

Equity LTCG and STCG

Long-term capital gains on listed equities and equity mutual funds continue at 12.5% beyond the Rs. 1,25,000 annual exemption. Short-term capital gains under Section 111A continue at 20%. The 24-month and 12-month holding period definitions remain consistent across asset classes.

Debt and hybrid funds

Debt mutual funds purchased on or after April 1, 2023, continue to be taxed at slab rates with no indexation. Older units retain the legacy treatment under the grandfathering applicable to them.

Real estate LTCG choice

For property bought before July 23, 2024, the choice between 12.5% without indexation and 20% with indexation continues. This is a planning lever worth modelling carefully when you sell.

TDS, TCS and reporting changes

TCS on foreign remittance

The Liberalised Remittance Scheme thresholds for TCS continue at Rs. 10 lakh per financial year for general remittances. Education and medical remittances retain preferential treatment with lower TCS rates as per current rules.

TDS thresholds

Several TDS thresholds were nudged upward in the rationalisation push, including those for rent under Section 194-I and professional fees under Section 194J. Verify the latest threshold on incometax.gov.in before assuming you are exempt.

Annual Information Statement

The AIS continues to expand its data sources. Expect mutual fund transactions, securities trades, large UPI receipts, and credit card spends above Rs. 2 lakh to show up automatically.

A real example

Meet Karthik, 34, Rs. 24L CTC, Hyderabad. He is on a flat salary, contributes Rs. 1,50,000 to EPF, pays Rs. 18,000 health insurance premium, has a home loan with Rs. 2,40,000 annual interest on a self-occupied property, and earned Rs. 80,000 in equity LTCG this year.

Here is how he should approach FY 2026-27:

1. Compute taxable income under the new regime: Rs. 24,00,000 minus standard deduction of Rs. 75,000 equals Rs. 23,25,000. NPS employer contribution under Section 80CCD(2) of, say, Rs. 1,68,000 (10% of basic plus DA) reduces it further to Rs. 21,57,000.
2. Apply slab tax — work it out cell-by-cell using the FY 2026-27 slabs published on incometax.gov.in. Add 4% health and education cess.
3. Compute under the old regime: subtract Rs. 1,50,000 (Section 80C from EPF), Rs. 25,000 (Section 80D for self), Rs. 2,00,000 (Section 24(b) interest), and Rs. 50,000 standard deduction. Apply old regime slabs.
4. Compare both. For Karthik's profile, the new regime almost always wins by Rs. 35,000 to Rs. 60,000.
5. Pay advance tax in four instalments by June 15, September 15, December 15, and March 15 to avoid Section 234B and 234C interest. Karthik's LTCG of Rs. 80,000 is below the Rs. 1,25,000 exemption, so no extra tax there.

What to do this week

1. Pull your latest payslip and Form 16 for FY 2025-26. Map salary components to both regimes.
2. Log in to incometax.gov.in and check your AIS. Reconcile every entry against your bank statement and broker P&L.
3. Run the 6-step assessment at https://myfinancial.in to see your old-vs-new regime delta, unused deductions, and insurance gap in under 10 minutes.
4. Update your investment declaration with HR if your regime choice has changed for FY 2026-27.
5. Set calendar reminders for the four advance tax due dates.

FAQ

Is the old tax regime being phased out?

Not officially, but every Budget since the introduction of Section 115BAC has tilted the field toward the new regime. The standard deduction was raised, slabs widened, and the rebate ceiling lifted. The old regime remains available, but it is no longer the default and very few taxpayers are better off staying with it.

Has the Rs. 1.5 lakh Section 80C limit changed?

No. The Section 80C ceiling remains Rs. 1,50,000 per financial year under the old regime. It is unchanged and was not touched in Budget 2026 as per current rules.

What is the LTCG exemption on equities for FY 2026-27?

Rs. 1,25,000 per financial year. Gains above this threshold are taxed at 12.5% without indexation on listed equities and equity-oriented mutual funds.

Does NPS still give an extra Rs. 50,000 deduction?

Yes, under Section 80CCD(1B) — but only under the old regime. The new regime does not allow this. However, employer contribution under Section 80CCD(2) is still allowed under the new regime, up to 14% of basic plus DA for private sector employees.

Will my home loan interest deduction continue?

Under the old regime, yes — Rs. 2,00,000 cap under Section 24(b) for self-occupied property. Under the new regime, this deduction is generally not available for self-occupied property as per current rules. Let-out property interest gets a different treatment.

Do I need to pay advance tax this year?

If your total tax liability after TDS exceeds Rs. 10,000 in the financial year, yes. Most salaried people with only salary income are covered by TDS, but if you have capital gains, rental income, freelance income, or large dividends, you almost certainly owe advance tax.

Where can I get the final notified rules?

The Finance Act, once passed, is published on indiabudget.gov.in and finmin.nic.in. Tax slab tables, deduction lists, and TDS thresholds for FY 2026-27 are mirrored on incometax.gov.in.

Sources

• https://www.indiabudget.gov.in/
• https://incometax.gov.in/
• https://finmin.nic.in/
• https://pfrda.org.in/
• https://www.sebi.gov.in/

This is general information, not personalised advice. For your situation, consult a Certified Financial Planner.