Income Tax Slab Rates for FY 2026-27 | Budget 2026 Updates: Finance Minister Nirmala Sitharaman presented her 9th straight budget in parliament on Sunday. Among several major key announcements, she set the tone for the next phase of income-tax reforms under the Modi 3.0 government. As expected, this Budget too builds on the relief measures announced over the last two years, though some long-standing taxpayer demands have not been addressed, as the focus turned towards compliance.
Income Tax Budget 2026 Updates: FM Sitharaman on New vs Old Tax Regime, Income Tax Slabs Rates FY 2026-27
The old tax regime, however, continues to test taxpayer patience. Deductions under Sections 80C, 80D and home loan benefits remained the same, leaving many middle-class taxpayers disappointed. Those who stayed back in the old regime were hoping for parity in standard deduction or an upward revision in key limits, but the Budget appears to signal that the government wants a gradual shift away from the deduction-heavy system rather than a revival of it.
Income Tax Budget 2026 Updates: New Income Tax Slabs, New Tax Regime Changes
Overall, Budget 2026 reads less like a giveaway Budget and more like a consolidation exercise. After the big savings delivered in 2024 and 2025, this year’s Budget focuses on predictability, smoother compliance under the new Income Tax law and nudging taxpayers steadily towards a simpler tax regime. For the middle class, the relief is real but measured — and the wait for a truly transformative clean-up of deductions and capital gains rules continues.
TCS cut on overseas tour packages a well-timed move to improves affordability, says expert
"The reduction of TCS on overseas tour packages to 2% is a well-timed move that improves affordability and reinforces traveller confidence. These measures are set to drive growth across both domestic and outbound tourism, promote premium travel segments such as cruises, and support the long-term development of a resilient tourism ecosystem," says Akansha Agarwal, Co-Founder & CMO, Int2Cruises.
One-time foreign asset disclosure scheme for small taxpayers announced
To address practical compliance gaps, the Budget proposes a one-time 6-month foreign asset disclosure scheme for students, young professionals, tech employees, relocated NRIs and similar taxpayers. The scheme will allow disclosure of foreign income or assets below a specified threshold, offering relief to those who missed reporting due to lack of awareness and helping them regularise their tax position.
More time to revise returns; staggered ITR deadlines announced
Budget 2026 has proposed extending the time limit for filing revised or belated income tax returns from December 31 to March 31, subject to payment of a nominal fee. In addition, the government plans to stagger ITR filing deadlines—individuals filing ITR-1 and ITR-2 will continue with a July 31 deadline, while non-audit business cases and trusts will get time till August 31, easing last-minute portal congestion.
Small taxpayers to get automated lower or nil TDS certificates
In a major compliance reform, the Budget proposes a rule-based automated system that will allow small taxpayers to obtain lower or nil TDS certificates without filing applications before assessing officers. This shift towards automation is expected to reduce manual intervention, speed up approvals and improve cash flow for taxpayers dependent on interest, dividend or contractual income.
Budget 2026 slashes TCS to 2% on overseas tours, education and medical remittances
The Budget has proposed a major relief by reducing Tax Collected at Source (TCS) on overseas tour programme packages to a flat 2%, down from the earlier 5% and 20% slabs, with no amount-based conditions. In another key move, TCS under the Liberalised Remittance Scheme (LRS) for education and medical purposes has also been cut from 5% to 2%, easing upfront cash-flow pressure for families, students and individuals making essential overseas payments.
New Income Tax Act to roll out from April 2026; simpler rules and redesigned forms promised
Union Budget 2026–27 has confirmed that the Income Tax Act, 2025 will come into force from April 1, 2026, replacing the decades-old tax law. The government said the objective of the new Act is to simplify language and provisions, reduce interpretational disputes and prevent litigation. Alongside the new law, simplified Income Tax Rules and redesigned ITR forms will be notified shortly, aimed at helping ordinary taxpayers comply without difficulty.
Budget 2026 introduces retrospective tax amendments to clarify key legal issues
Based on the Finance Bill 2026 and the Memorandum Explaining the Provisions, the Finance Minister has introduced retrospective amendments to the Income-tax Act, 1961. These changes are aimed at nullifying the impact of certain court rulings, including those related to time limits for transfer pricing assessments (linked to the Shelf Drilling case), jurisdiction of Assessing Officers (JAO vs FAO), and issues concerning the Document Identification Number (DIN).
The move seeks to bring clarity and consistency in tax administration by clearly reflecting the legislative intent in the law.
Budget 2026 clarifies DIN rule: Minor errors won’t invalidate tax notices or assessment orders
Budget 2026 has clarified that income tax communications will not become invalid due to minor mistakes, defects or omissions, as long as a valid Document Identification Number (DIN) has been lawfully generated and correctly quoted. This applies to ITRs, assessment orders, notices, summons and other proceedings issued under the Income Tax Act.
The move is aimed at reducing technical disputes and litigation, ensuring that tax proceedings are not challenged solely on procedural lapses when the DIN requirement has been properly followed.
SGB investors alert: Budget 2026 changes one important rule
Budget 2026 has tightened the capital gains tax exemption on Sovereign Gold Bonds (SGBs). The tax-free benefit on redemption will now be available only to investors who buy SGBs at the original RBI issue and hold them till maturity.
This means investors who purchase SGBs from the secondary market may no longer get capital gains tax exemption at maturity. The change reduces flexibility for small investors who preferred buying SGBs on stock exchanges for liquidity or lower prices, making primary issuance the only route for full tax benefits.
Budget 2026 eases NRI property deals: TAN no longer needed for resident buyers
Budget 2026 has proposed a major compliance relief for resident individuals and HUFs buying property from non-residents by removing the requirement to obtain a Tax Deduction and Collection Account Number (TAN) for TDS purposes. Earlier, while buyers purchasing property from resident sellers did not need a TAN, those dealing with non-resident sellers were mandatorily required to obtain one, even for one-time transactions.
Commenting on the move, Suresh Surana said the proposal will significantly reduce procedural burden for homebuyers. Under the amendment to Section 397(1)(c) of the Income Tax Act, 2025, resident buyers will be allowed to deduct and deposit TDS using a PAN-based mechanism, bringing parity with resident property transactions and simplifying compliance.
Has the ITR filing deadline changed beyond July 31? Here’s what Budget 2026 says
Under Budget 2026, the income tax return (ITR) filing deadline for individuals remains unchanged at July 31 for those filing ITR-1 and ITR-2. There is no extension beyond July 31 for salaried taxpayers and most individual filers.
However, the government has provided relief to non-audit business entities and trusts, whose ITR filing deadline has been extended to August 31. In addition, taxpayers can now revise or file belated returns till March 31 on payment of a nominal fee, offering extra time to correct errors without changing the original July 31 deadline.
Budget 2026 tax announcements: New ITR rules, tougher penalties in focus for taxpayers
Union Budget 2026 has announced major compliance-focused changes for taxpayers, even as income tax slabs and rates remain unchanged. The government will roll out the new Income Tax Act, 2025 from April 1, 2026, with redesigned ITR forms and more time to file revised or belated returns till March 31. At the same time, the Budget tightens rules on incorrect reporting, with misreporting of income attracting penalties of up to 200% of tax, while genuine mistakes face lower penalties. Relief measures such as lower TCS under LRS, automated lower or nil TDS certificates, and a one-time foreign asset disclosure scheme aim to ease compliance for honest taxpayers.
Budget 2026 proposes simpler rules for recognised provident funds
Union Budget 2026 has proposed rationalising the provisions for recognised provident funds (RPFs) by removing parity-based and percentage-based limits on employer contributions. The move also seeks to do away with salary-linked relaxations and shareholder-based distinctions, while aligning eligibility for recognition with Section 17 of the EPF & MP Act, 1952.
The proposal further aims to ease investment rules by removing rigid statutory caps that are inconsistent with prevailing EPFO norms. In addition, the Budget proposes rationalising the due date for employers to deposit employee PF contributions in order to claim deductions, simplifying compliance for employers and employees alike.
Active F&O traders may see returns shrink despite disciplined strategies
Even disciplined retail investors using futures and options for hedging or limited strategies may see lower post-cost returns due to the higher STT burden. The government says the move is to curb speculative losses, but trading in derivatives has clearly become costlier.
Higher STT on F&O trades makes derivatives costlier for retail investors
Budget 2026 has raised STT on futures to 0.05% from 0.02% and increased STT on options premium and exercise to 0.15%. For retail investors trading frequently in F&O, this directly increases trading costs, reducing net profits and making speculative trades more expensive.
No interest deduction on dividend and mutual fund income
The Budget removes the interest deduction against dividend and mutual fund income. Investors who used borrowed funds or margin financing may now face lower post-tax returns, making leveraged investing less attractive.
Tougher penalty rules raise cost of reporting mistakes
Under the new framework, genuine errors attract a 50% penalty, while misreporting can lead to penalties up to 200% of tax. For small investors dealing with capital gains, crypto or foreign assets, even classification errors can turn expensive.
Sovereign Gold Bond tax benefit tightened
Capital gains tax exemption on Sovereign Gold Bonds will apply only if bonds are subscribed at original issue and held till maturity. Investors who bought SGBs from the secondary market or plan early exits lose this tax advantage.
Lower TCS brings cash-flow relief for overseas spends
TCS on overseas tours, education and medical expenses under LRS has been reduced to 2%, easing cash-flow pressure for families, students and investors with foreign commitments.
More time to revise ITR reduces panic for investors
The deadline for revised and belated returns has been extended to March 31, giving investors more time to correct mistakes in capital gains, dividend or foreign income reporting.
Automated TDS and foreign asset disclosure ease compliance stress
A rule-based automated system for lower or nil TDS certificates and a one-time six-month foreign asset disclosure scheme aim to reduce compliance stress and offer relief to honest small investors.
Experts see tax holiday till 2047 boosting India’s data centre ecosystem
According to experts, the tax holiday for foreign companies offering cloud services using Indian data centres till 2047 could significantly boost India’s data centre and digital infrastructure ecosystem. The move is expected to attract long-term foreign investment and strengthen India’s position as a global cloud services hub.
Experts welcome TCS cut, shift to ease of compliance in Budget 2026
Experts say the reduction of TCS to 2% on education, medical expenses and overseas tours is a major relief for taxpayers facing cash-flow pressure. They also welcome the broader move towards simpler compliance, reduced litigation, decriminalisation of offences, and replacing penalties with monetary fees, calling it a step towards greater taxpayer confidence.
Experts say safe harbour margin, buyback tax clarity reduce friction
Experts believe key direct tax measures—such as the 15.5% safe harbour margin for IT and ITES services, clarity on capital gains treatment for share buybacks, and limited changes in tax rates—signal the government’s intent to reduce friction with taxpayers. The shift towards decriminalisation and certainty in transfer pricing is expected to encourage entrepreneurship and GCC expansion in India.
STT hike in F&O meant to deter risky bets by small investors, says FM Sitharaman
Finance Minister Nirmala Sitharaman on Sunday said the hike in Securities Transaction Tax (STT) on futures and options (F&O) is aimed at discouraging small investors from speculative derivative trading, where many end up losing money.
Announcing the STT increase, the FM noted that excessive participation by retail investors in high-risk F&O trades has led to significant losses, prompting the government to step in. The higher STT is intended to act as a deterrent against reckless speculation, while nudging investors towards more stable and long-term investment avenues.
ITR deadlines staggered to reduce filing rush; non-audit cases get extra month
To ease last-minute congestion on the income tax portal, the government has staggered ITR filing deadlines. Individuals filing ITR-1 and ITR-2 will continue to have a July 31 deadline, while non-audit business entities and trusts will now be allowed to file returns up to August 31, providing additional compliance relief.
One-time foreign asset disclosure window for small taxpayers announced
The government has announced a one-time six-month Foreign Asset Disclosure Scheme to help small taxpayers—such as students and technology professionals—voluntarily disclose overseas assets or income below a specified threshold. Those who come forward under the scheme will receive immunity from prosecution, offering relief to individuals who may have missed disclosures due to lack of awareness.
Budget 2026 cuts TCS to 2% on overseas tours, education and medical remittances
Budget 2026 has sharply reduced Tax Collected at Source (TCS) on overseas tour packages to a flat 2%, from the earlier 5% or 20%. Similarly, TCS under the Liberalised Remittance Scheme (LRS) for education and medical purposes has been lowered from 5% to 2%, easing upfront cash-flow pressure for families, students and international travellers.
New Income Tax Act to roll out from April 1, 2026; simpler rules, redesigned ITR forms
The government announced that the Income Tax Act, 2025 will come into force from April 1, 2026, replacing the decades-old tax law. The new Act features simplified provisions and redesigned ITR forms aimed at making compliance easier for ordinary taxpayers. The overhaul seeks to remove ambiguities, reduce litigation, and help taxpayers understand and comply with tax rules without professional assistance.
Budget 2026 tightens penalty rules for underreporting of income
One of the major tax rule changes announced in Budget 2026 is a sharper penalty framework for underreporting of income. If underreporting happens due to a genuine mistake or oversight, the penalty will be limited to 50% of the tax amount payable on such income.
However, in cases where underreporting is a result of misreporting of income—such as giving wrong or faulty information or misrepresenting the nature of income—the penalty will be a steep 200% of the tax amount. The move is aimed at discouraging deliberate tax evasion while distinguishing it from honest errors.