Income Tax related proposals in the new Budget (2026-27)
Yesterday (On 1st February 2026), Finance Minister Shrimati Nirmala Sitharaman presented the Budget Proposal for the coming financial year (2026-27). All salaried people eagerly await the income tax-related announcements in the Budget.So, I have tried to compile income tax-related proposals. If I miss anything, other members may kindly point it out.
Here are the income tax-related proposals of the Finance Minister's Budget Speech yesterday:
1. No changes to income tax slabs or rates for individuals under both the old and new tax regimes for FY 2026-27 (AY 2027-28). The new regime slabs remain:
Up to Rs. 4 lakh: 0%
Rs. 4-8 lakh: 5%
Rs. 8-12 lakh: 10%
Rs. 12-16 lakh: 15%
Rs. 16-20 lakh: 20%
Rs. 20-24 lakh: 25%
Above Rs. 24 lakh: 30%
2. Implementation of the new Income Tax Act, 2025: This replaces the Income Tax Act, 1961 and comes into effect from 1st April, 2026 (i.e., FY 2026-27 onwards). It aims to modernize and simplify the tax framework, with simplified rules, forms, and procedures to be notified shortly, giving taxpayers time to adapt.
3. Rationalization of TDS and TCS provisions: Several rates were lowered or simplified to reduce cash flow issues and compliance burden, including:
(a) TCS on certain items (e.g., scrap, minerals) rationalized to 2%.
(b) TCS on LRS remittances for education/medical purposes reduced to 2% (with thresholds).
(c) TDS on overseas tour packages reduced to 2%.
(d) Introduction of a new rule-based, automated scheme for small taxpayers to obtain lower/nil TDS certificates (replacing discretionary processes).
4. Changes related to buyback of shares: From 1st April, 2026, buyback proceeds will be taxed as capital gains (instead of as dividend). Normal capital gains rates apply to non-promoters; additional tax applies to promoters (22% for corporate promoters, 30% for non-corporate).
5. Ease of compliance and filing measures:
(a) Extended deadlines for ITR filing (e.g., staggered deadlines: 31st July for salaried people, 31st August for non-audit businesses).
(b) Revised returns deadline extended to 31st March of the assessment year (with nominal fees).
(c) Single-window filing for Forms 15G/15H through depositories.
(d) Rationalization of penalties and prosecution to reduce multiplicity and litigation.
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In addition to the above uninspiring news, I personally have more bad news. The Government is going to impose more taxes on tobacco products. So, my cigarettes would be more costly.