Finance Ministry Reviews Key Tax Reforms Ahead Of Union Budget 2026-27

As the countdown begins for the presentation of the Union Budget 2026-27 on February 1, the Finance Ministry has taken stock of major Budget announcements made in recent years and assessed their implementation and impact.

The ministry recalled that the Finance Act 2025 brought wide-ranging modifications to the personal income tax framework under the New Tax Regime (NTR). These changes were introduced to simplify taxation and allow individuals to retain a higher portion of their earnings.

Taking to X, the Finance Ministry posted, “The Finance Act, 2025 introduced comprehensive changes to the Personal Income Tax structure under the New Tax Regime (NTR), leaving more money in taxpayers’ hands. These changes are effective from FY 2025-26 (AY 2026-27).”

Under the updated structure, individuals with annual incomes of up to ₹12 lakh are exempt from paying income tax. For salaried employees, this effective exemption increases to ₹12.75 lakh after accounting for a standard deduction of ₹75,000.

According to the government, revised slabs, reduced tax rates, and higher rebates have made the system more straightforward and beneficial for taxpayers.

The Finance Ministry also drew attention to reforms in corporate taxation aimed at improving India’s investment climate.

The government taxes companies that choose not to claim certain deductions and exemptions at a concessional rate of 22 per cent.

Additionally, new manufacturing enterprises are eligible for a reduced tax rate of 15 per cent for a defined period. The policy aims to support industrial expansion and boost job creation.

Another major reform highlighted was the extension of tax benefits under Section 10(23FE).

The government has allowed Sovereign Wealth Funds and Pension Funds to make eligible infrastructure investments until 31 March 2030. It will continue to grant them tax exemptions on dividends, interest income and long-term capital gains.

The ministry said that this extension will help reinforce long-term financing for infrastructure development.

The ministry described the Income Tax Bill, 2025, as a crucial step towards overhauling India’s outdated direct tax laws.

The proposed legislation aims to replace a direct tax framework that has been in place for more than six decades. It seeks to improve administrative efficiency while balancing investor interests with taxpayer relief.

The Finance Act 2025 also implemented additional activities and extended timelines for the International Financial Services Centre (IFSC). The amendments took effect from April 1, 2025.

“The Government has fulfilled the Budget promise to provide “certainty of taxation” for Alternative Investment Funds #AIF by clarifying the classification of their income from securities,” the Ministry posted. 

According to the Finance Ministry, these measures collectively demonstrate the government’s intent to promote economic growth. They are also aimed at attracting investment and strengthening economic confidence.

The ministry said the reforms will help create a stable and transparent tax environment. It added that these measures come as the country moves towards the Union Budget 2026-27.