Union Budget 2026: Major changes in Income Tax law; policies to be simplified

NEW DELHI: Union Finance Minister Nirmala Sitharaman announced that a new Income Tax Act will come into effect from April 1. The announcement was made during the Budget presentation in the Lok Sabha. She said that tax policies will be simplified. The minister also introduced new forms and lower TCS rates.

The Finance Minister announced changes to the Income Tax Return (ITR) filing process. The deadline for individual taxpayers using ITR-1 and ITR-2 forms has been extended to July 31. Tax return details can be updated even after scrutiny.

Compensation received for vehicle accident claims will now be exempt from tax. The fiscal deficit will be reduced this year and is projected at 4.5 per cent of GDP. TCS on foreign travel has been reduced from 5 per cent to 2 per cent. TCS for medical education has also been cut from 5 per cent to 2 per cent. The Finance Minister warned that strict action will be taken against those who under-report income or provide false information.

Tax on sending money abroad will be reduced. Tax will be imposed on the transfer of immovable property owned by Non-Resident Indians (NRIs). There is no change in income tax slabs. The Budget also proposes an increase in the limit for duty-free imports.

The procedure for collecting tax at source (TDS) on property transactions involving NRIs will be simplified. Buyers will now be able to pay TDS using their own PAN card, removing the need for a TAN. This will make property transactions easier.

Individuals who fail to disclose foreign investments below Rs 20 lakh will be exempt from penalties. A six-month window has been provided to disclose foreign assets. Cloud services will get a tax holiday until 2047. NRIs investing in capital expenditure (capex) will receive tax exemptions for five years.