Union Budget 2026: What employers and salaried employees need to know

If you're a salaried employee or someone who deals with employee compensation every month, one question that often arises after every Union Budget is: Will the take-home salary increase after this budget? The short answer from this year's union budget is no. However, as an employer and a salaried employee, there are some crucial changes that you should be aware of. In this post, we've broken down those changes without any jargon.

Income tax changes

The tax slabs and tax rates that decide how much of your income is taxed remain the same for the financial year 2026–2027. This means your tax calculation will follow the same structure as last year:

• If your annual income is up to ₹4,00,000 you don’t have to pay any tax.
• For income between ₹4,00,001and ₹8,00,000, 5% of that portion is taxed.
• For income between ₹8,00,001 and ₹12,00,000, 10% applies.
• For income between ₹12,00,001 and ₹16,00,000, the tax rate is 15%.
• For income between ₹16,00,001 and ₹20,00,000, 20% is taxed.
• For income between ₹20,00,001 and ₹24,00,000, the tax rate is 25%.
• Any income above ₹24,00,000 is taxed at 30%.

In short, there’s no change in how your salary is taxed compared to last year.

New simplified income tax act

The Union Ministry has announced that the New Income Tax Act of 2025 will come into effect on April 1, 2026. One of the primary goals of this particular act is to remove all the legal and tax-related jargon and explain tax provisions with simpler language that's easy to understand. This is being done to reduce legal disputes and make it easier for tax-paying individuals to ensure compliance.

Extended deadline for filing revised returns for FY 2025

As per this year's Union Budget, the deadline to file your revised returns has been extended. If you forgot to declare an income source or made a mistake, you now have sufficient time to fix it and file your revised returns. It has been increased from 9 months (December 31) to 12 months (March 31).

Motor accident compensation interest is now tax-free

With the Union Budget 2026, any interest earned on motor accident compensation is now tax-free. In simple terms, if someone receives ₹10,00,000 as compensation and earns ₹50,000 as interest on that amount, they do not have to pay any tax on the interest. This change offers relief to individuals who are already dealing with the financial impact of an accident, without adding an extra tax burden.

Penalty for misreporting taxes

A clear penalty framework has been proposed for cases where income is misreported. When caught, taxpayers who give incorrect details or hide a particular income source have to pay the due tax, interest on that tax, and an additional penalty equal to 100% of the tax amount.

Wrapping up

The ultimate goal of the Union Budget 2026 is to simplify the entire tax process for individuals, aiming to prevent redundancies and make it easy for taxpayers to ensure compliance. While the numbers may not have changed, the way taxes are managed is slowly becoming more straightforward!