Several amendments announced in the Union Budget 2026 will take effect from April 1, bringing important changes for taxpayers and investors. The government says the measures aim to simplify tax compliance, reduce procedural delays and streamline tax collection. The changes will apply from the financial year 2026–27.
A major reform is the introduction of the new Income Tax Act, 2025, which replaces the existing Income Tax Act, 1961. The new law will come into force from April 1, 2026.
However, there is no change in income tax slabs for the financial year 2026–27. The current tax rates and slab structure will continue.
The government has extended the deadline for filing certain income tax returns.
Key changes include:
• The due date for filing ITR-3 and ITR-4 for non-audit taxpayers has been extended to August 31
• This change will also apply to returns for FY 2025–26
• The deadline for ITR-1 and ITR-2 remains July 31
• The tax audit deadline continues to be October 31
Taxpayers will now get more time to correct mistakes in their returns.
• The deadline for filing a revised return has been extended from December 31 to March 31 of the relevant financial year
• However, an additional fee will apply if a revised return is filed after December 31
• The due date for filing belated returns remains unchanged
The Budget has also rationalised Tax Collected at Source (TCS) rates for several transactions.
The key changes from April 2026 include:
• Alcoholic beverages: TCS increased from 1 percent to 2 percent
• Tendu leaves: TCS reduced from 5 percent to 2 percent
• Scrap sales: TCS increased from 1 percent to 2 percent
• Minerals such as coal, lignite and iron ore: TCS raised from 1 percent to 2 percent
The government has reduced TCS rates on certain remittances under the Liberalised Remittance Scheme (LRS).
• Overseas tour packages: TCS reduced to a flat 2 percent from earlier rates of 5 percent and 20 percent
• Remittances for education and medical treatment: TCS reduced from 5 percent to 2 percent
Futures and options (F&O) traders will face higher transaction costs from April.
• STT on futures increased from 0.02 percent to 0.05 percent
• STT on options increased from 0.1 percent to 0.15 percent
Securities Transaction Tax (STT) is levied on the purchase and sale of securities on recognised stock exchanges.
Taxation of share buybacks will also change.
• Buyback proceeds will now be taxed as capital gains from April 1, 2026
• Earlier, buybacks were treated as deemed dividends and taxed according to the investor’s slab rate
Promoter shareholders will have to pay a differential buyback tax — about 22 percent for corporate promoters and 30 percent for non-corporate promoters.
Another key change relates to dividend income. From April 2026, taxpayers will not be allowed to deduct interest expenses incurred to earn dividend income or income from mutual fund units. Earlier, interest deductions up to 20 percent of such income were permitted.
As a result, dividend income will now be taxed fully according to the applicable income tax slab.
