From April 1, 2026, the Income Tax Act, 2025 will replace the old law, offering no tax up to Rs 12 lakh under the new regime, stable GST rates, and a focus on customs duty reforms
No tax on income up to Rs 12 lakh: Public tax relief announced in the 2025 Budget will continue next year. Under the new tax regime, annual income up to Rs 12 lakh will not be taxed. There will be no exemptions or deductions, but tax slabs will have lower rates. Income between Rs 4 lakh and Rs 8 lakh will be taxed at 5 percent, while income above Rs 24 lakh will be taxed at 30 percent.
Taxes on cigarettes and pan masala: Two new tax measures will be introduced in 2026, with implementation dates to be announced by the government. These include an additional excise duty on cigarettes and a new cess on pan masala, over and above existing GST rates, to increase revenue from select consumption categories.GST rates enter a static phase: There are no plans to cut GST rates next year. However, 2026 will be the first full year of the rationalised GST structure introduced in September 2025. This reform led to a reduction in GST rates on 375 goods and services. GST has largely been simplified into two slabs, 5 percent and 18 percent, while higher rates on sin goods will remain unchanged.Focus shifts to customs duty reforms: Following GST and income tax reforms, customs duty reform will be a key agenda in 2026. In the Union Budget 2025–26, the government reduced the number of customs tariff slabs to eight by removing seven additional rates.The government is also working on implementing faceless assessment and a digital workflow in customs administration, with the aim of reducing delays, lowering compliance costs, and improving transparency and predictability in export-import processes.
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New Delhi: The Income Tax Act, 2025 will come into force from April 1, 2026, replacing the Income Tax Act, 1961. The new law aims to simplify legal language, reduce ambiguity, and minimise tax-related litigation.
