Budget recap: How much income tax relief FM Nirmala Sitharaman gave taxpayers last year? What to expect in Budget 2026?

Budget Recap: With only a few days now left for Finance Minister Nirmala Sitharaman to announce Budget 2026, taxpayers across India are hoping for more income tax reliefs after the Centre announced bumper tax rate cuts to increase consumption last year.

In Budget 2025, Sitharaman made several announcements that came as a boon for taxpayers and salaried people. From income tax rate cuts to new tax slabs, Budget 2025 fulfilled many demands of the middle class.

Here are five income tax announcements FM Sitharaman made during Budget 2025 —

1. Income Tax rate cut

In a surprise announcement, Sitharaman exempted income up to ₹12 lakh from tax, a booster for the middle class. For salaried people, the effective threshold rose to ₹12.75 lakh after including the ₹75,000 standard deduction. As a result, incomes up to ₹12.75 lakh became tax-free.

2. New tax slabs

Under the new tax regime, Sitharaman also announced new slab rates.

₹0 – ₹4 lakh: No Tax

₹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%

₹24 lakh and above: 30%

3. New Income Tax Bill

The Finance Minister also announced the New Income Tax Bill, 2025, which was later passed in the Lok Sabha. The New Income Tax Act, 2025, which is set to come into effect from 1 April this year, simplifies language, removes obsolete provisions and streamlines sections to give way to a simpler version.

4. TDS rate cut

Sitharaman also made several changes to how TDS (Tax Deducted at Source) worked. TDS on rent limit increased from ₹2.4 lakh to ₹6 lakh, reducing compliance for small landlords. The threshold for senior citizens’ interest income doubled from ₹50,000 to ₹1 lakh.

5. ITR(U) relief

The Finance Minister announced that Updated ITRs (ITR (U)) could be filed for up to four years, instead of the earlier two years, giving taxpayers more time to update their income tax returns.

Budget 2026: Can we expect more income tax rate cuts?

After Budget 2025, taxpayers are now looking to Budget 2026 for more relief on the income tax rules. However, experts do not anticipate any consequential announcement on direct taxes.

“Considering the changes done last year in the slab rates and the consequential impact on tax collections, it may not be feasible for the government to make any further changes this year. However, going forward, if the cost-of-living parameters and inflation rates are considered for a default annual tweak in the slab rates in the new tax regime, it may benefit a large section of taxpayers and provide a fillip to further popularising the new tax regime,” said Richa Sawhney, Partner, Tax, at Grant Thornton Bharat.

According to Nishant Shah, Partner at Economic Laws Practice, a smoother implementation of the Income Tax Act, 2025, is expected in Budget 2026.

“On direct taxes, a key expectation is broader tax certainty for foreign investors and smoother implementation of the new Income-tax Act, 2025. Within this, the government is reportedly examining a proposal to exempt sovereign wealth funds and other patient capital from tax on equity gains in Indian listed securities, expanding the current, narrower exemptions that focus mainly on infrastructure investments. This is aimed at reversing recent FPI outflows and attracting long‑term, stable capital,” he told LiveMint.