From January onwards, the question in my inbox is always the same. Will the slabs change? Will the standard deduction go up? Should I wait?
I can't tell you what the Finance Minister will announce, and neither can the people who will confidently predict it on television. What I can tell you is what the last four Budgets did, which levers actually exist, what a change in each would be worth to you, and — most useful of all — why none of it should stop you from finishing your planning for the current year.
# First, the year it affects
This is the point most people get wrong, so it comes first.
The Budget presented in February comes with a Finance Bill. For personal income tax, the rate and slab changes in a February Budget are normally made effective from the next 1 April. So Budget 2027, presented in February 2027, would normally set the rules for Tax Year 2027-28 — income earned from 1 April 2027 to 31 March 2028, with the return filed in 2028.
Your tax for Tax Year 2026-27 (FY 2026-27 — the return you file in 2027, earlier called AY 2027-28) is governed by the law already in force: the Income-tax Act, 2025, as amended by the Finance Act, 2026.
There are exceptions, and they are worth knowing because they catch people out:
- Some changes take effect from the date of announcement. The July 2024 Budget changed equity capital gains rates with effect from 23 July 2024, in the middle of the year. Transaction taxes such as STT, and TDS/TCS rates, are also often changed from a specified date rather than the next tax year.
- A July Budget after an election is different. In an election year, the February Budget is an interim one, and the full Budget in July can change the rates for the year already running — as happened in 2024.
For a normal February Budget, though, the working rule holds. Plan Tax Year 2026-27 on today's law.
# What the last four Budgets actually did for salaried taxpayers
| Budget | Main changes for salaried individuals |
|---|---|
| February 2023 | New regime made the default from FY 2023-24; rebate extended to income up to ₹7 lakh; ₹50,000 standard deduction extended to the new regime; highest surcharge capped at 25% in the new regime |
| July 2024 (full Budget after interim) | New-regime standard deduction raised to ₹75,000; new-regime slabs revised; employer NPS contribution deduction raised to 14% of salary in the new regime; equity STCG raised to 20% and LTCG to 12.5%, with the LTCG exemption raised to ₹1.25 lakh; indexation removed for most assets |
| February 2025 | New slabs — nil up to ₹4 lakh, then 5% steps up to 30% above ₹24 lakh; rebate raised to cover taxable income up to ₹12 lakh (₹60,000); updated-return window extended to 48 months |
| February 2026 | No change to slabs, rates, standard deduction or rebate. Revised-return deadline moved to 31 March (with a fee after 31 December); ITR due date for non-audit ITR-3/ITR-4 filers moved to 31 August; TCS on education/medical LRS remittances and overseas tour packages cut to 2%; buybacks taxed as capital gains; SGB redemption exemption limited to original subscribers holding till maturity |
Two things stand out.
First, every rupee of rate relief went into the new regime. The old regime's slabs, its ₹50,000 standard deduction and its deduction caps did not move across these four Budgets. The ₹1.5 lakh cap now in Section 123 (old 80C) was last raised in 2014.
Second, Budget 2026 was a pause year. The new Income-tax Act took effect on 1 April 2026, and the Budget left rates alone. Whether 2027 resumes the pattern of rate relief, or stays quiet, is the open question — and it is exactly the question this article won't answer.
# The levers that exist — and what each is worth to you
These are the knobs a Budget can turn for a salaried taxpayer. Current positions are as of today, Tax Year 2026-27.
| Lever | Where it stands now | Who a change would help |
|---|---|---|
| New-regime slabs (Section 202, old 115BAC) | Nil to ₹4L; 5%/10%/15%/20%/25% in ₹4L steps; 30% above ₹24L | Everyone with taxable income above ₹12L in the new regime |
| Standard deduction (Section 19) | ₹75,000 new regime / ₹50,000 old | All salaried and pensioners, in proportion to their marginal rate |
| Rebate (Section 156, old 87A) | Up to ₹60,000 where taxable income is up to ₹12L (new regime), with marginal relief just above | People just above ₹12L |
| Section 123 (old 80C) cap | ₹1.5 lakh — old regime only | Old-regime filers only |
| Section 126 (old 80D) | ₹25,000 / ₹50,000 limits — old regime only | Old-regime filers only |
| HRA exemption | Old regime only; the Income-tax Rules, 2026 already extended the 50%-of-salary limit to eight cities | Old-regime renters |
| Employer NPS contribution | 14% of salary in the new regime, 10% in the old | Employees whose employer offers it |
| Capital gains | Equity STCG 20%; LTCG 12.5% above ₹1.25L | Salaried investors with MF and share gains |
# Putting a number on it
Here is how to think about any headline. The value of a deduction change to you is the change multiplied by your marginal rate, plus cess — and zero if your income is inside the rebate zone.
Useful context, but not the kind of number worth delaying decisions for.
# Why an old-regime revival is structurally unlikely
I am not predicting the Budget. I am describing the direction policy has taken, which is visible in the law itself.
The new regime was introduced as an option in 2020, made the default in 2023, and has absorbed every significant relief since. The old regime has been left alone rather than improved. At current rates, the deductions needed for the old regime to catch up are large:
The table below uses current slabs with 4% cess and no surcharge. "Deductions" means deductions beyond the standard deduction.
| Gross salary | New regime tax | Old regime tax with ₹4.25L of deductions | Deductions needed to break even |
|---|---|---|---|
| ₹15 lakh | ₹97,500 | ₹1,24,800 | about ₹5.44 lakh |
| ₹20 lakh | ₹1,92,400 | ₹2,80,800 | about ₹7.08 lakh |
| ₹25 lakh | ₹3,19,800 | ₹4,36,800 | about ₹8.00 lakh |
The ₹4.25 lakh column assumes a full ₹1.5 lakh under Section 123, ₹25,000 under Section 126, ₹50,000 of your own NPS contribution and ₹2 lakh of home-loan interest — already more than most salaried people claim. It still loses at every level.
For a Budget to rescue the old regime, it would have to reverse a policy that four consecutive Budgets pointed the other way. That can happen. But it is not a sensible basis for your March decisions. If you are still in the old regime, the question for you is whether it still wins today — our old vs new regime decision guide walks through the break-even — not whether it might win next year.
# What to do now for Tax Year 2026-27, whatever the Budget says
None of this depends on 1 February.
- Confirm your regime with real numbers. If the new regime wins, stop buying products for deductions you can't use. If the old regime still wins, make the investments early. Our Section 123 deep dive covers what qualifies.
- Check your position near ₹12 lakh. If your taxable income is just above the rebate threshold, marginal relief applies, and small changes like employer NPS can matter a lot. The Section 87A marginal relief guide has the arithmetic.
- Ask HR about employer NPS. It is one of the few deductions that works in the new regime. See how employer NPS in the CTC changes the picture before the next salary revision.
- Look at capital gains before 31 March 2027. If you hold equity funds with unrealised long-term gains, the ₹1.25 lakh exemption resets each year. Whether to book gains is a personal decision; knowing the number isn't optional.
- Pay advance tax on other income. If you have interest, rent or capital gains that your employer's TDS doesn't cover, the remaining instalments fall on 15 December and 15 March.
# On Budget day, watch for these — in this order
- Effective dates. Tax Year 2027-28, or immediately?
- New-regime slabs, standard deduction and rebate. These affect the most people.
- Anything touching the old regime. Changes here, in either direction, would signal more than their rupee value.
- Capital gains rates, holding periods and exemptions. These can take effect from the day itself.
- TDS, TCS and filing dates. Less glamorous, but they change your cash flow and compliance calendar sooner than rate changes do.
Then close the speech and read the Finance Bill. The speech tells you the intent; the Bill tells you the law.
Plan Tax Year 2026-27 on the law you have, not the Budget you're hoping for. VittSphere ONE's Old vs New Regime Planner and Tax Planning Intelligence work on today's rules, and ARTHA will walk you through the Budget changes the day they are announced. Start free →
# References (verified 23 September 2026)
- ClearTax — Budget 2026 highlights
- KPMG India — Union Budget 2026-27 highlights
- Business Standard — Finance Ministry to commence exercise for Budget 2027-28 from 12 October
- Income Tax Department — Section 156, Income-tax Act, 2025 (rebate)
- Mondaq — Income Tax Rules, 2026 notified: HRA, allowance and form changes
Disclaimer: This article is educational and general in nature. It does not predict the contents of Union Budget 2027-28 and should not be read as doing so. All tax figures are computed on the rates in force for Tax Year 2026-27 as understood on the date below, using illustrative salary and deduction amounts, 4% cess and no surcharge; they are not any client's data. The hypothetical standard deduction figure is illustrative only. This post will be revised after the Budget is presented. Please confirm your position with a qualified Chartered Accountant before acting. Data verified 23 September 2026.
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