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Union Budget 2026: How FM Nirmala Sitharaman’s Budgets gradually reshaped the new tax regime

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By Sangeeta Ojha

4 min read | Updated on January 19, 2026, 12:55 IST

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SUMMARY

The new tax regime was first introduced by FM Nirmala Sitharaman, in her Budget speech on February 1, 2020. Initially, many taxpayers stayed with the old regime, citing the loss of popular benefits such as Section 80C and health insurance deductions.

budget 2026 new tax regime over the years

These gradual but consistent changes have shaped expectations from Budget 2026. | Image: Shutterstock

As taxpayers and investors look ahead to the Union Budget 2026, much of the discussion is rooted in how the new income tax regime has evolved over the past few years. Successive Budgets presented by Finance Minister Nirmala Sitharaman have steadily reshaped the system, signalling the government’s preference for a simpler, low-deduction tax structure.
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The new tax regime was introduced as an alternative to the traditional system, offering lower slab rates in return for giving up most exemptions and deductions. The new tax regime was first introduced by FM Nirmala Sitharaman, in her Budget speech on February 1, 2020. Initially, many taxpayers stayed with the old regime, citing the loss of popular benefits such as Section 80C and health insurance deductions.

New tax regime slabs and rates as per Budget 2020

Taxable Income Slab (₹)Tax Rate
Up to 2.5 lakhExempt
2.5 lakh – 5 lakh5%
5 lakh – 7.5 lakh10%
7.5 lakh – 10 lakh15%
10 lakh – 12.5 lakh20%
12.5 lakh – 15 lakh25%
Above 15 lakh30%

That began to change in Budget 2023, when the government made the new tax regime the default option for income-tax return filing. Slabs were rationalised, the basic exemption limit was increased, and a standard deduction was extended to salaried taxpayers and pensioners. These moves made the regime more competitive and easier to adopt.

New tax regime slabs and rates as per Budget 2023

Taxable Income Slab (₹)Tax Rate
0 – 3 lakhNil
3 lakh – 6 lakh5%
6 lakh – 9 lakh10%
9 lakh – 12 lakh15%
12 lakh – 15 lakh20%
Above 15 lakh30%

In Budget 2024, the focus remained on salaried individuals. The standard deduction was increased further, and incentives linked to National Pension System (NPS) contributions were expanded, particularly for private-sector employees. The idea was to encourage retirement savings without reintroducing multiple deductions that complicate tax filing.

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New tax regime slabs and rates as per Budget 2024

Taxable Income Slab (₹)Tax Rate
0 – 3 lakhNil
3 lakh – 7 lakh5%
7 lakh – 10 lakh10%
10 lakh – 12 lakh15%
12 lakh – 15 lakh20%
Above 15 lakh30%

The biggest shift came in Budget 2025, when the government announced substantial personal tax relief under the new regime. Revised slabs and rebates effectively made income up to a higher threshold tax-free for many taxpayers, significantly reducing the burden on the middle class. As a result, a growing number of individuals began opting for the new regime over the old one.

New tax regime slabs and rates as per Budget 2025

Taxable Income Slab (₹)Tax Rate
₹0 – ₹4 lakhNil
₹4 lakh – ₹8 lakh5%
₹8 lakh – ₹12 lakh10%
₹12 lakh – ₹16 lakh15%
₹16 lakh – ₹20 lakh20%
₹20 lakh – ₹24 lakh25%
Above ₹24 lakh30%

These gradual but consistent changes have shaped expectations from Budget 2026. Rather than dramatic announcements, taxpayers and market participants are now looking for clarity on long-term direction and stability in tax policy. Whether the government chooses to further fine-tune slabs or simplify the dual-regime structure remains to be seen.

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About The Author

sangeeta-ojha.webp
Sangeeta Ojha is a business and finance journalist with vast experience across leading media platforms, including Mint and India Today. Passionate about personal finance, she has built a reputation for covering a wide range of PF topics—from income tax and mutual funds to insurance, savings, and investing.

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