Union Budget 2025 brought one of the biggest personal tax changes in years, and its impact still shapes payroll today. Budget 2026 kept the income tax slabs unchanged, so the 2025 structure continues for Tax Year 2026-27.
Here is what HR and payroll teams need to know.
1. No income tax up to Rs 12 lakh under the new regime
With the enhanced rebate, individuals with taxable income up to Rs 12 lakh pay no tax under the new regime. For salaried employees, the Rs 75,000 standard deduction effectively takes this to Rs 12.75 lakh.
2. Revised new regime slabs
- Up to Rs 4 lakh: nil
- Rs 4 to 8 lakh: 5%
- Rs 8 to 12 lakh: 10%
- Rs 12 to 16 lakh: 15%
- Rs 16 to 20 lakh: 20%
- Rs 20 to 24 lakh: 25%
- Above Rs 24 lakh: 30%
3. New regime remains the default
Employees who do not choose the old regime are taxed under the new one. HR should collect regime declarations early in the year to avoid wrong TDS.
4. A new Income-tax law
The Budget announced a new, simplified income tax law. The Income-tax Act, 2025 is now in force from 1 April 2026, replacing "previous year" and "assessment year" with a single "Tax Year". Form 16 becomes Form 130 and Form 24Q becomes Form 138 from Tax Year 2026-27, while Form 16 still applies for FY 2025-26.
5. Support for gig and platform workers
The Budget announced registration of gig workers on the e-Shram portal, identity cards, and healthcare coverage under PM Jan Arogya Yojana. The Labour Codes also recognise gig and platform workers under social security.
What this means for payroll
- Recalculate TDS projections for employees under both regimes
- Help employees compare the regimes before they choose
- Update payroll systems and tax forms for the new Income-tax Act
- Communicate changes clearly so employees understand their take-home pay
Common payroll mistakes to avoid
- Applying the wrong regime because declarations were not collected
- Ignoring the standard deduction in monthly TDS projections
- Using old form names and references after the new Act took effect
How QkrHR helps
- TDS under both the old and new regimes, with Form 24Q and Form 16 support
- Challans, returns, and a statutory register pack keep compliance organised
- Statutory compliance is included in every QkrHR plan
- The employee self-service portal and mobile app give employees easy access to payslips and tax documents
The bottom line
Tax changes reach every employee's payslip. Accurate TDS, clear communication, and an up-to-date payroll system keep both employees and the company on the right side of the law.
Tax rules change. Please confirm specific cases with your CA.
Read the full explanation: https://www.qkrbiz.com/hrms-software/key-highlights-union-budget-2025-for-hrs
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