Finance Minister Nirmala Sitharaman on Sunday kept income tax slabs unchanged in the Union Budget 2026, meaning taxpayers will continue to be taxed at the same rates as in FY 2025–26 under both the old and new tax regimes.
While there has been no change in slab rates, the Budget seeks to address several long-standing concerns of middle-class taxpayers through targeted relief measures. These include a reduction in Tax Collected at Source (TCS) rates and the introduction of new deductions related to dividend income.
As a result, salaried individuals and other taxpayers will not see any change in their tax slabs, but may benefit from procedural simplifications and compliance-related relief announced in Budget 2026.
Tax slabs under the new regime
(No change from FY 2025–26)
Tax slabs under the old regime
(No change from FY 2025–26)
Budget 2026: Tax holiday for global cloud firms using Indian data centres
Presenting her ninth consecutive Budget in Parliament, Sitharaman announced a tax holiday until 2047 for foreign companies offering global cloud services through data centres located in India. Such firms will be required to serve Indian customers through an Indian reseller entity.
To bring certainty in taxation, the Finance Minister also proposed a safe harbour margin of 15% on costs for data centre services provided from India by related entities.
To improve logistics efficiency for electronic manufacturing, the Budget proposed a safe harbour regime for non-residents using bonded warehouses to store components, with profits capped at 2% of invoice value. This would translate into an effective tax rate of around 0.7%, significantly lower than in many competing jurisdictions.
To promote toll manufacturing, the Budget also proposed a five-year income tax exemption for non-residents supplying capital goods, equipment or tooling to toll manufacturers operating in bonded zones.
In addition, Sitharaman announced a set of indirect tax measures aimed at simplifying the tariff structure, supporting domestic manufacturing, boosting export competitiveness and correcting duty inversions.
These announcements follow the tabling of the Economic Survey 2025–26 in Parliament, which outlined the state of the economy ahead of the Budget.