Union Budget 2026 marks a shift in focus from tax cuts to meaningful compliance reforms and procedural ease. Instead of altering income tax slabs, the government has prioritised simplifying filings, reducing litigation stress, improving cash flow, and preparing taxpayers for the rollout of the Income Tax Act, 2025, effective from April 1, 2026.  

 overseas education or medical expenses. With extended return-filing timelines, lower TCS rates, automated certificates, and streamlined NRI compliance, Budget 2026 aims to strengthen a trust-based and technology-driven tax ecosystem, while encouraging long-term investing and responsible financial behaviour. 

Key Highlights 

•  No changes to income tax slabs for both old and new tax regimes 
•  ITR filing deadline extended from December 31 to March 31 with nominal fee 
•  TCS reduced from 5% to 2% for education and medical remittances abroad 
•  TCS on overseas tour packages simplified to flat 2% 
•  Share buybacks to be taxed as capital gains (effective rates 22% and 30%) 
•  One-time foreign asset disclosure scheme for small taxpayers 
•  NRI investment limit in Indian equities increased from 5% to 10% 
•  Motor accident claim interest fully exempted from tax and TDS 

Budget 2026 focused on compliance reforms and ease of filing rather than major tax rate changes. The Income Tax Act 2025 will come into effect from April 1, 2026. While income tax slabs remain unchanged, several important relief measures were announced for middle-class taxpayers. 

Income Tax Slabs (No Change) 

Finance Minister Nirmala Sitharaman did not announce any changes to income tax slabs in Budget 2026. Both the old and new tax regimes remain unchanged from FY 2025-26. 

New Tax Regime Slabs 

Old Tax Regime Slabs 

Note: Under the new tax regime for FY 2025-26, income up to ₹12 lakh is effectively tax-free due to rebate under Section 87A. For salaried individuals with standard deduction of ₹75,000, the tax-free income limit becomes ₹12.75 lakh. 

Major Tax Changes in Budget 2026 

1. Extended ITR Filing Deadline 

Taxpayers now have more time to file revised income tax returns: 

• Deadline extended from December 31 to M https://economictimes.indiatimes.com/wealth/tax/income-tax-union-budget-2026-live-updates-standard-deduction-hike-income-tax-slab-changes-nirmala-sitharaman-tax-relief-feb-1/liveblog/127830262.cms?from=mdr arch 31 
• Applies to all taxpayers starting April 1, 2026 
• Fee structure: ₹5,000 or ₹1,000 depending on taxable income 
• Non-audit business cases: ITR deadline moved from July 31 to August 31 

2. Reduced TCS Rates 

Tax Collected at Source (TCS) rates have been reduced for several categories: 

3. Share Buyback Taxation Overhaul 

Major change in how share buybacks are taxed: 

• Previously: Treated as dividend income 
• Now: Taxed as capital gains for all shareholders 
• Corporate promoters: Effective tax rate of 22% 
• Non-corporate promoters: Effective tax rate of 30% 
• Benefit: Eliminates 'phantom loss' trap for minority shareholders 

4. One-Time Foreign Asset Disclosure Scheme 

A special compliance window for small taxpayers with undisclosed foreign assets: 

• Target: Students, young professionals, tech employees, relocated NRIs 
• Window period: 6 months 
• Category A: Assets/income up to ₹1 crore 
• Payment: 30% of fair market value or undisclosed income 
• Category B: Assets up to ₹5 crore with specified fee 
• Immunity: Protection from prosecution upon payment 

5. Increased NRI Investment Limits 

Non-resident Indians can now invest more in Indian equities: 

• Individual limit: Increased from 5% to 10% in listed companies 
• Aggregate limit: Increased from 10% to 24% for all NRIs combined 
• Applies to: Portfolio Investment Scheme (PIS) 
• Benefit: Opens up more investment opportunities for overseas investors 

6. Tax Exemption on Motor Accident Claims 

Important relief for accident victims: 

• Interest awarded by Motor Accident Claims Tribunals is now tax-exempt 
• No TDS will be deducted on such interest 
• Applies to: Natural persons (individuals) 
• Benefit: Victims receive full compensation without tax deductions 

7. Automated Nil Deduction Certificates 

New rule-based automated system for small taxpayers: 

• Small taxpayers can obtain nil/lower TDS certificates automatically 
• Computerised process eliminates manual interaction with tax officers 
• Applies to: Those with limited income and no ultimate tax liability 
• Benefit: Reduces hassle of claiming refunds and improves cash flow 

8. Centralised Form 15G/H Submission 

From April 1, 2027, investors can save TDS more easily: 

• Submit single Form 15G/15H to your depository 
• Covers: Dividends, interest from securities, and mutual fund income 
• Previously: Separate forms needed for each investment 
• Applies to: All securities held in demat form 

9. Simplified NRI Property Transactions 

Major compliance simplification for property buyers: 

• TAN no longer required for buying property from NRIs 
• Resident buyers can now use their PAN for TDS deduction 
• Brings NRI transactions in line with resident-to-resident deals 
• Benefit: Removes major hurdle in real estate transactions 

10. Appeal and Penalty Reforms 

Significant relief measures for taxpayers in disputes: 

• Prepayment for appeals reduced from 20% to 10% 
• No interest on penalty amount during appeal period 
• Updated returns allowed even after reassessment begins 
• Assessment and penalty proceedings merged into common order 

Other Important Changes 

Securities Transaction Tax (STT) Increase 

To discourage excessive speculation in derivatives: 

• Futures: STT increased from 0.02% to 0.05% (150% hike) 
• Options: STT increased from 0.01% to 0.015% (50% hike) 
• Impact: Higher trading costs, reduced speculative volumes 

Sovereign Gold Bonds (SGB) Tax Changes 

Starting FY 2027: 

• Tax-free redemption only for SGBs bought directly at issuance and held till maturity 
• SGBs bought from secondary market will no longer enjoy tax exemption 

Dividend Income Tax Change 

From April 1, 2026: 

• Tax break removed for interest on loans used to buy stocks/mutual funds 
• Cannot reduce dividend/mutual fund income by loan interest 
• Impact: Higher taxes for investors using borrowed money 

Crypto Transaction Reporting 

Stricter penalties for crypto exchanges: 

• ₹200 per day fine for not submitting required statements 
• ₹50,000 penalty for incorrect information or not fixing errors 
• Effective from: April 1, 2026 

New Dividend Deduction for Cooperatives 

Under the new tax regime: 

• Taxpayers can claim deductions on inter-cooperative dividend income 
• Applies to the extent dividend is distributed to members 
• Benefit: Makes new regime more attractive for cooperative members 

What Remains Unchanged? 

Budget 2026 did not make changes to several key areas: 

• Standard Deduction: Remains ₹75,000 under new regime, ₹50,000 under old regime 
• Section 80C Limit: Still capped at ₹1.5 lakh (unchanged since 2014) 
• NPS Tax Benefits: No new deductions for self-contributions under new regime 
• NPS Withdrawal: 60% tax-free limit remains unchanged 
• EPF Wage Ceiling: Remains at ₹15,000 (unchanged since 2014) 
• Capital Gains Tax: No changes to LTCG/STCG rates for debt mutual funds 
• PMAY: No new announcements for Pradhan Mantri Awas Yojana 

Income Tax Act 2025 

The new Income Tax Act 2025 will come into effect from April 1, 2026: 

• Comprehensive review completed in record time 
• Redesigned forms for easier compliance 
• Simpler language for ordinary citizens 
• Staggered deadlines to reduce portal congestion 
• Focus on trust-based compliance framework 

Key Takeaways for Taxpayers 

For Salaried Individuals: 

• No change in tax liability as slabs remain unchanged 
• More time to file revised returns (till March 31) 
• Simpler ITR forms under new Income Tax Act 2025 

For Investors: 

• Share buybacks now taxed as capital gains (more favourable) 
• Higher STT on F&O trading (discourages speculation) 
• SGB tax benefits only for primary market purchases held till maturity 
• Centralised Form 15G/H submission from April 2027 

For NRIs: 

• Can now invest up to 10% in listed Indian companies (doubled from 5%) 
• No TAN required for property transactions (can use PAN) 
• Lower TCS on overseas remittances (2% vs 5%) 

For International Travellers and Students: 

• Flat 2% TCS on tour packages (simplified from 5%/20% structure) 
• Reduced TCS from 5% to 2% for education abroad 
• Reduced TCS from 5% to 2% for medical treatment abroad 
• Better cash flow as less money is blocked upfront 

For Small Taxpayers: 

• Automated nil/lower TDS certificates 
• One-time foreign asset disclosure opportunity 
• Reduced prepayment for appeals (10% vs 20%) 

Important Dates to Remember 

Conclusion 

Budget 2026 focused on compliance reforms and ease of doing business rather than only tax cuts. The emphasis was on: 

1. Simplifying tax procedures and reducing paperwork 

2. Providing more time and flexibility for compliance 

3. Reducing cash flow burden through lower TCS rates 

4. Encouraging long-term investment over speculation 

5. Building a trust-based compliance framework 

The focus on reducing compliance burden and improving cash flow through lower TCS rates provides practical relief to families, especially those with international education or medical needs. 

Budget 2026 takes a practical and forward-looking approach by focusing on easier compliance and system efficiency rather than immediate tax rate reductions. The government has introduced reforms that directly impact cash flow, litigation burden, and procedural complexity. 

Extended filing timelines, lower TCS rates, automated certificates, simplified NRI transactions, and capital gains-based buyback taxation collectively ease the pressure on taxpayers and investors. At the same time, higher STT on derivatives and changes to SGB taxation signal a clear intent to discourage excessive speculation and promote long-term investing. 

With the upcoming implementation of the Income Tax Act, 2025, Budget 2026 aims to promote a more transparent, technology-driven, and trust-based tax system. Although middle-class taxpayers may have expected slab revisions, the emphasis on smoother compliance and practical relief offers tangible benefits. 

Disclaimer: This article is for informational purposes only. Tax laws are subject to change, and individual circumstances vary. Please consult a qualified tax professional for personalised advice.