UNION BUDGET 2026-27

[MOHAN P]

For Information .

New Income Tax Act

·  New Income tax Act ,2025 to come into effect from April 2026

· The simplified Income Tax Rules and Forms will be notified shortly. The forms redesigned for easy compliance of ordinary citizens.  

There may have no changes in Income Tax slabs.

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Government to setup a “High Level Committee on Banking for Viksit Bharat”, to comprehensively review the sector and align it with India’s next phase of growth, while safeguarding financial stability, inclusion and consumer protection.

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[MOHAN P]

For information only:

Tax Update from Budget 2026

1. Introduction of the New Income Tax Act

•  The Income Tax Act, 2025 will come into force from April 1, 2026 (AY 2027-28 onwards).

•  This replaces the 1961 Act with a streamlined version (sections reduced significantly), simpler rules, redesigned forms, and ITR formats to be notified soon for better taxpayer preparation.

2. Income Tax Slabs and Rates

•  No Changes: Slabs and rates remain unchanged under both new and old regimes for FY 2026-27 (AY 2027-28).

•  New Tax Regime Slabs (continuing):

•  Up to ₹4 lakh: 0%

•  ₹4–8 lakh: 5%

•  ₹8–12 lakh: 10%

•  ₹12–16 lakh: 15%

•  ₹16–20 lakh: 20%

•  ₹20–24 lakh: 25%

•  Above ₹24 lakh: 30%

•  Income up to ₹12 lakh effectively tax-free (with Section 87A rebate up to ₹60,000); for salaried, up to ₹12.75 lakh after standard deduction.

•  Standard Deduction: ₹75,000 (new regime); ₹50,000 (old regime) – no increase announced.

3. Minimum Alternate Tax (MAT) Regime – Section 115JB

•  Rate Reduction: MAT rate on book profits lowered from 15% to 14% (plus surcharge and cess).

•  MAT as Final Tax: From April 1, 2026 (AY 2027-28 onwards), MAT becomes the final tax liability for applicable companies.

•  No carry-forward or set-off of MAT credit against future tax liabilities.

•  This structural change provides long-term tax certainty and reduces litigation over credit claims.

•  Exemption for NRIs: Non-Resident Indians fully exempted from MAT.

•  Applicability: Continues for domestic companies not opting for concessional regimes (e.g., under Sections 115BAA/115BAB, which remain MAT-exempt).

•  Transition: Old regime (15% with credit) applies for pre-April 2026 assessments; companies should reassess book profit planning due to loss of credit mechanism.

4. ITR Filing and Compliance Timelines

•  Extended Deadline for Revised and Belated ITRs:

•  Time limit for filing revised returns (Section 139(5)) and belated returns (Section 139(4)) extended from December 31 to March 31 of the assessment year.

•  Subject to a nominal fee (details to be notified).

•  This grants an extra three months for corrections, omissions, or incorporating new information, easing compliance and reducing disputes.

•  Original ITR Filing Deadlines (Staggered):

•  ITR-1 and ITR-2 (salaried individuals, simple income sources): Remains July 31 of the assessment year – no change for continuity.

•  Non-audit business cases, trusts, and complex returns (e.g., ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 without audit): Extended to August 31 of the assessment year.

•  This decongests the filing season and allows more preparation time for businesses/trusts.

•  Audit-Related Deadlines: Unchanged – tax audit reports and related ITRs due by October 31 (or as existing).

•  Applicability: These changes apply prospectively (likely AY 2027-28 onwards, aligned with the new Act). For AY 2026-27, old timelines continue unless clarified. Late fees (Section 234F), interest (Section 234A), etc., may still apply for delayed filings.

5. Exemptions and Relief Measures

•  Interest awarded by Motor Accident Claims Tribunal (MACT) to natural persons now fully exempt from income tax; related compliance simplified/eliminated.

•  Automated nil/lower TDS certificates for small taxpayers with multiple securities to ease deduction burdens and improve cash flow.

6. Tax Collected at Source (TCS) Reductions

•  Overseas tour packages: TCS rate reduced to 2% (from 5%/20%), no threshold limit.

•  Education and medical remittances under LRS: TCS rate lowered to 2% (from 5%).

7. Tax Deducted at Source (TDS) Amendments

•  Manpower supply services explicitly covered under contractor TDS provisions (rates 1%/2%) to remove ambiguity.

•  Other procedural simplifications to reduce litigation.

8. Securities Transaction Tax (STT)

•  On futures: Increased to 0.05% (from 0.02%).

•  On options: Increased to 0.15% (from 0.01%).

•  Aimed at moderating speculative trading in derivatives.

9. Other Notable Provisions

•  20-year tax holiday (until 2047) for foreign cloud providers investing in Indian data centers to boost digital infrastructure.

•  No expansions in Section 80C deductions or major new exemptions – consistent with push toward the new regime.

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