Budget 2026 Brings New Income Tax Law, Major Relief and Changes in Direct Taxes

Finance Minister Nirmala Sitharaman announced major changes to the direct tax system in Budget 2026-27. She informed the Lok Sabha that the new Income Tax Act, 2025, will be implemented from April 1 of this year. This law will replace the nearly six-decade-old Income Tax Act, 1961. This was Nirmala Sitharaman's ninth consecutive budget.

The government states that the new law will be based on simple language, reduced disputes, and easy compliance, providing relief to both taxpayers and businesses. Its primary objective is to make tax filing less complex and reduce unnecessary litigation.

Here are 10 major direct tax announcements in Budget 2026:

1. Reduction in TCS for education and medical treatment abroad: The TCS (Tax Collection at Source) on remittances sent abroad for education and medical treatment has been reduced from 5% to 2%. This change will come into effect from April 1, 2026, and will provide significant relief to students and their families.

2. More time for revised returns: Taxpayers will now have 12 months from the end of the tax year to file revised returns. Previously, this limit was 9 months. This provides ample opportunity to correct errors.

3. STT increased on equity futures: The STT on futures and options in the stock market has been increased from 0.02% to 0.05%. The tax on options will increase from 0.1% to 0.15%, making futures and options trading more expensive.

4. Tax rules changed on sovereign gold bonds: Now, only investors who purchase sovereign gold bonds issued directly by the Reserve Bank of India and hold them until maturity will be eligible for tax exemption. Bonds purchased from the secondary market may be subject to capital gains tax.

5. Capital gains tax reinstated on share buybacks: Capital gains tax has been reinstated on buybacks. Investors will now only be taxed on net profits, which will benefit long-term investors.

6. Foreign Asset Disclosure Scheme: The government has launched a six-month one-time foreign asset disclosure scheme. Small taxpayers, students, and NRIs can declare their foreign assets without facing any litigation.

7. Clarification on ITR deadlines: The deadline for ITR-1 and ITR-2 remains July 31st. Revised returns can be filed until March 31st, with a nominal fee.

8. Relief for small taxpayers: The process for obtaining low or nil TDS certificates will now be automated. Forms 15G/15H will also reach companies directly through the depository.

9. Penalties for crypto reporting lapses: Failure to report crypto transactions will result in a penalty of ₹200 per day, and a penalty of up to ₹50,000 for incorrect information.

10. Purchasing property from NRIs made easier: Residents purchasing property from NRIs will no longer need to obtain a TAN. Tax deductions will be possible only through a PAN card.