Freelancer/business income tax slabs and rates ahead of Union Budget 2026

With the Union Budget 2026 approaching, freelancers, professionals and small business owners are watching closely for any changes in income tax rules, especially around tax slabs and relief for self-employed taxpayers.

Current tax regimes: New vs old

Since the Finance Act, 2024, the new tax regime under Section 115BAC is the default for all individual taxpayers, including those earning through business or profession. It offers lower tax rates but limited deductions. Taxpayers can still choose the old regime, which allows popular deductions (e.g., Sections 80C/80D), but the choice rules differ depending on income type.

Individuals without business income

Can switch between old and new tax regimes each year when filing ITR (if filed within the due date).

Once they switch to the old regime, returning to the new regime is allowed just once in a lifetime and only in a future assessment year, making tax planning critical.

Tax slabs: Same for all individuals

New tax regime (Default)

Up to ₹4 lakh: 0%

₹4–8 lakh: 5%

₹8–12 lakh: 10%

₹12–16 lakh: 15%

₹16–20 lakh: 20%

₹20–24 lakh: 25%

Above ₹24 lakh: 30%

Old tax regime

Up to ₹2.5 lakh: 0%

₹2.5–5 lakh: 5%

₹5–10 lakh: 20%

Above ₹10 lakh: 30%

Why this matters for freelancers

Many freelancers assume that business/professional income is taxed differently from salary, but that’s not true. It’s the computation of income and regime choice rules that differ, not the tax rates.

Income up to ₹4 lakh is tax-free.

The highest rate (30%) applies only above ₹24 lakh.

This Section 87A rebate can be especially beneficial for freelancers using Section 44ADA, where 50% of gross receipts are treated as presumptive income. If taxable income stays below ₹12 lakh after computations, tax can be nil.