Tax Rates and Slab Changes and 3 Benefits of New Income Tax Bill

A new bill was introduced in the lower house of parliament this year. The new income tax bill waits for the President’s approval. If approved, then this bill will come into effect on April 1, 2026, with changes in tax rates and slab. In short, taxpayers can claim the benefit when filing their Income Tax Return (ITR) for FY 2026-27.

Tax rates and slab changes

The new income tax bill does not change the essence of tax rates or slabs of the Union Budget. However, it applies the new tax regime framework. In Budget 2025, a new tax regime framework was laid out.

• New Tax Regime: The new tax regime is the norm. It gives you a full refund on reported income up to ₹12 lakh per year. Making this income free from tax deduction.
• Old Tax Regime: You can still choose the old tax regime. But in which situation? When you have countless tax deductions and benefits from reported income. In the old tax regime, you’ll need to choose it wisely (whether you get benefits or tax deductions).

Suppose your annual income from an accounting job under the new regime is ₹12 lakh. So, your salary is accounted for a standard deduction of ₹75,000. Hence, your remaining taxable income is ₹11,25,000. The new regime’s refund ensures you pay no tax after filing an income tax return.

Why This New Income Tax Bill Matters?

Employees’ pensions are entirely tax-exempt under the current Income Tax Act. However, non-employees’ commuted pensions are fully taxable under “Income from Other Sources.”

The Lok Sabha’s Select Committee said this was an unfair difference in how taxes were handled and said that all eligible pensioners should get the same benefits. The implementation of this recommendation has been completed.

3 Benefits of the New Income Tax Bill For Taxpayers

• Easy refunds for late ITR filers: If you missed the deadline to file your tax return for some genuine reason, no worries.  You can still claim your TDS (Tax Deducted at Source) refund under the new bill. This benefit was not available in the old tax regime.
• Quick refunds and reviews: The new income tax bill improves faceless reviews for more processes. Processes like scrutiny and appeals take time in the old tax regime. But the new income tax bill equals in less physical contact with tax officials and likely faster processing of refunds.
• Relaxed deadlines for updated returns: You now have up to four years to update your tax return and rectify errors without penalty, instead of the previous two years.

In the old system, let’s say you forgot to deduct an investment that saved you money on taxes when you filed your tax return and then realised your mistake. The new bill gives you up to four years to file a new tax return and claim the entire deduction amount.

Big relief for Pensioners

The new income tax bill will benefit government employees, public sector employees, private sector employees and any individual investor.

Final Thoughts

The Income Tax Bill 2025 is a major win for pensioners, especially when considering those outside the government employment sector. From April 2026, commuted pensions from approved pension funds will be fully tax-exempt for all eligible recipients—bringing true equality and relief to retirees.

In short, the new income tax bill simplified slabs (0% up to ₹12 lakh/year with standard deduction & refund). Lower tax rates across most slabs. But you can’t claim 80C, 80D, HRA, etc. It is best for those who don’t use many exemptions or prefer more take-home salary.