Income Tax Amendments in Budget 2026: Topic-wise Summary of Key Proposals

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

New Income-tax law

Income Tax Act, 2025 to be enforced from 1 April 2026

IT Act, 1961 in force

IT Act, 2025 effective from 01.04.2026

Speech ¶2

Full transition to new code from FY/TY starting 1 April 2026

Simplified Rules/Forms

Simplified rules/forms to be notified shortly

Existing rules/forms

New simplified rules/forms (timeline: "shortly")

Speech ¶3

Lower compliance friction; time to prepare

Redesigned return forms

Forms redesigned for ordinary citizens

Current forms

New citizen-friendly forms

Speech ¶4

Easier filing, fewer errors

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

MACT interest exemption

MACT interest to natural person exempt; no TDS

Taxable + TDS applied (as per existing practice)

Exempt + No TDS (no limit)

Speech ¶5; Annexure 1(i)

Direct relief to accident victims; stops TDS blockage

TCS - Overseas tour package

Single reduced TCS rate without threshold

5% / 20% (two-tier)

2% (no amount stipulation)

Speech ¶6; Annexure 6(ii)

Lower cashflow impact for travellers/tour operators

TCS - LRS education/medical

TCS reduced for education & medical remittances

5%

2%

Speech ¶7; Annexure 6(ii)

Reduced upfront TCS outflow for genuine remittances

TDS - Manpower supply classification

Manpower supply included as "work" → contractor TDS

Ambiguity (often treated as professional fees)

TDS under contractor route: 1% / 2%

Speech ¶8; Annexure 1(ii) (Sec 402(47), Sec 393(1))

Fewer disputes; lower/clear TDS rate

Lower/Nil TDS certificate (small taxpayers)

Automated rule-based certificate issuance

AO application-based

Automated + online issuance after e-verification

Speech ¶9; Annexure 1(iii)

Faster certificates; less interface/discretion

Form 15G/15H via Depositories

Depository can accept and pass to multiple payers

Investor had to submit separately to each payer

Single submission to Depository → shared to relevant companies

Speech ¶10; Annexure 1(iv) (Sec 393(6))

Significant compliance ease for multi-company investors

Reporting frequency of 15G/15H

Quarterly reporting of declarations

Monthly reporting

Quarterly reporting

Annexure 1(iv)

Operational easing for payers/depositories

Revised return time limit

Extend revision window up to 31 March

Up to 31 Dec following tax year

Up to 31 Mar following tax year

Speech ¶11; Annexure 1(v)

Extra 3 months to correct mistakes

Fee for late revision

Fee introduced if revision after 31 Dec

Not specified in provided text

Rs 1,000 (income ≤ Rs 5L) / Rs 5,000 (income > Rs 5L) if revised after 31 Dec

Annexure 1(v)

Discourages very late revisions; still allows correction

Staggered ITR due date

Different due dates for different categories

Broadly 31 July cluster

ITR-1/2: 31 July ; non-audit business/trusts: 31 Aug

Speech ¶12; Annexure 1(vi)

Reduced filing congestion; extra time for small business/trusts

NR property sale TDS (no TAN)

PAN-based challan for resident buyer

TAN requirement

No TAN ; PAN-based challan/reporting

Speech ¶13; Annexure 1(vii) (Sec 393(2) Table Sl.17)

Big simplification for individual/HUF buyers

Foreign asset disclosure scheme (FAST-DS 2026)

One-time 6-month scheme for small taxpayers

No such scheme

One-time 6-month disclosure window

Speech ¶14; Annexure 1(x)

Clean-up route for smaller overseas asset cases

FAST-DS Category A

For non-disclosed overseas income/asset

No route specified in text

Limit ≤ Rs 1 cr ; tax 30% + additional 30%

Speech ¶15(A)

Settlement + immunity from prosecution on payment

FAST-DS Category B

Income/tax disclosed but asset not declared

No route specified in text

Asset value ≤ Rs 5 cr ; fee Rs 1 lakh

Speech ¶15(B)

Immunity from penalty & prosecution at fixed fee

Employee contribution deduction due date

Deposit up to ROI due date allowed

Earlier stricter due date practice (not stated)

Allowed if deposited by ROI due date under Sec 263(1)

Annexure 1(viii)

Reduces disallowance litigation on timing

Non-life insurance computation

Allow deduction in year when tax deducted/paid

Earlier disallow/add-back until TDS paid (as per bullet)

Deduction allowed in year of TDS deduction/payment

Annexure 1(ix)

Removes timing mismatch; aligns with compliance

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

Assessment + penalty single order

Common order integrating assessment & penalty

Separate proceedings (assessment then penalty)

Integrated common order

Speech ¶16; Annexure 2(i)

Faster closure; fewer parallel appeals

Interest on penalty during first appeal

No interest on penalty amount during first appeal period

Interest exposure existed (not quantified in text)

Interest on penalty kept in abeyance during first appeal

Speech ¶16; Annexure 2(i)

Cashflow relief during appellate stage

Pre-deposit for appeal

Pre-payment reduced

20%

10% (on core tax demand only)

Speech ¶16

Lower upfront burden for appellants

Updated return after reassessment begins

Allow update even after reassessment initiation

Not allowed (as per proposal context)

Allowed with additional tax +10% over applicable rate

Speech ¶17; Annexure 2(viii)

Settlement route; reduces contested reassessments

AO to rely on updated return

AO to use only updated return in proceedings

Not specified

Updated return becomes base for AO proceedings

Speech ¶17

Simplifies proceeding, narrows dispute

Immunity extended to misreporting

Immunity framework extended to misreporting

Earlier immunity focused on underreporting

For misreporting: pay 100% of tax as additional income-tax

Speech ¶18; Annexure 2(ii)

Structured settlement, but higher cost

Certain misreporting settlement

Higher additional tax for some items

Not specified

For certain misreporting (e.g., unexplained cash credit): 120% of tax

Annexure 2(ii)

Strong deterrence for serious misreporting categories

Technical penalties converted to fees

Audit/TP report/SFT defaults converted to fee

Penalties

Fee per day (cap to be prescribed)

Speech ¶19; Annexure 2(iii)

Less discretionary; predictable cost

Decriminalise: non-production of books

Remove criminality

Criminal exposure existed

Decriminalised

Speech ¶21; Annexure 2(iv)

Reduced prosecution risk

Decriminalise: TDS where payment in kind

Remove criminality

Criminal exposure existed

Decriminalised

Speech ¶21; Annexure 2(iv)

Major relief for barter/in-kind models

Minor offences - fine only

Fine-only for minor offences

Imprisonment possible (not specified)

Fine only

Speech ¶21- 22; Annexure 2(iv)

Proportionate enforcement

Imprisonment nature

Switch to simple imprisonment

Rigorous imprisonment existed

Simple imprisonment only

Annexure 2(iv)

Decriminalisation tilt

Max punishment (non-repeat)

Reduce max imprisonment

Up to 7 years

Max 2 years

Annexure 2(iv); Speech ¶22

Lower criminal exposure

Where max earlier 2 yrs

Reduce to 6 months

Max 2 years

Max 6 months (with/without fine; no minimum)

Annexure 2(iv)

Further relaxation for lower offences

Court power to convert to fine

Courts can convert imprisonment into fine

Not specified

Express power stated

Speech ¶22

More settlement / proportionality

Black Money Act -

Immunity from prosecution

Immunity not available

Immunity available retrospectively from 01.10.2024

Speech ¶23; Annexure 2(ix)

Relief for small foreign asset non-reporting

Special income tax rate (sec 195 mention)

Rate rationalised

60%

30%

Annexure 2(v)

Very significant rate change for specified incomes

Penalty structure (special incomes)

Penalty merged with misreporting

Penalty 10% of tax (stated)

Penalty aligned with misreporting: 200% of tax

Annexure 2(v)

Lower base tax but high penalty lever for misreporting

Search - "other person" single-year material

Limit block period

Full block assessment even if single-year

Block period limited if material relates only to 1 tax year

Annexure 2(vi)

Reduced burden for non-searched persons

Search assessment limitation timeline

Extend timeline for specified person

12 months

18 months

Annexure 2(vii) (Sec 296)

More time to conclude specified search assessments

Updated return - loss reduction allowed

Updated return allowed where loss reduced

Not specified

Expressly allowed

Annexure 2(viii)

Wider scope of voluntary correction

No penalty on additional income in updated return

Penalty not leviable on additional income declared

Not specified

Express relief provided

Annexure 2(viii)

Encourages voluntary disclosure

Crypto statement penalties (Sec 509)

Introduce penalties for non-filing/inaccurate filing

No specific penalty stated

Rs 200/day (non-furnishing); Rs 50,000 (inaccurate & not corrected)

Annexure 2(x)

Strong compliance push for crypto reporting

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

Primary co-op deduction scope

Extend deduction to cattle feed & cotton seed supplied (members' produce)

Milk/oilseeds/fruits/vegetables (members)

Adds cattle feed + cotton seed

Speech ¶24; Annexure 3(i)

Wider eligibility; supports agri input supply chains

Inter-co-op dividend deduction (new regime)

Allow deduction to extent further distributed

Not allowed in new regime (as per text rationale)

Allowed to extent further distributed

Speech ¶25; Annexure 3(ii)

Avoids double taxation cascade

National co-op federation dividend exemption

3-year exemption for dividend on investments up to 31.01.2026 (if distributed onward)

Not specified

3 years , investments up to 31.01.2026 (distribution condition)

Speech ¶26; Annexure 3(iii)

Targeted federation incentive

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

IT services clubbing

Club software/ITES/KPO/R&D into IT Services category

Separate categories

Single "Information Technology Services"

Speech ¶27- 28

Less classification litigation

Safe harbour margin

Common margin

Not specified in provided text

15.5%

Speech ¶28

Predictable TP benchmark

Safe harbour threshold

Threshold enhanced

Rs 300 cr

Rs 2,000 cr

Speech ¶29

Larger companies become eligible

Safe harbour approval

Automated approval; 5-year continuity

Officer examination

Automated rule-driven; continuation up to 5 years

Speech ¶30

Lower interface; faster certainty

Unilateral APA timeline

Fast track for IT services

Not specified in provided text

Target 2 years (+ 6 months extension on request)

Speech ¶31

Faster APA closure

Modified return for AEs

Extend to associated entities

Only APA entity

APA entity + associated entities

Speech ¶32; Annexure 6(xi)

Consistent downstream adjustments

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

Cloud services tax holiday

Tax holiday till 2047 for foreign co using India data centres (global sales); India sales via reseller

No such holiday

Tax holiday up to 2047 (conditions apply)

Speech ¶33; Annexure 4(i)

Attracts global cloud platforms into India infra

Related-party data centre safe harbour

Safe harbour margin

Not specified

15% on cost

Speech ¶34; Annexure 4(i)

TP certainty for group structures

Bonded warehouse component warehousing

Safe harbour for non-residents

Not specified

Profit margin 2% of invoice value

Speech ¶35

Supports JIT logistics in electronics

Toll manufacturing incentive

5-year exemption for NR supplying equipment/tooling to toll manufacturer in bonded zone

Not specified

5 tax years exemption

Speech ¶36; Annexure 4(ii)

Strengthens contract manufacturing ecosystem

Non-resident expert global income

Exemption of non-India sourced income for expert under notified scheme

Not specified

5 years exemption (conditions: non-res in prior 5 yrs)

Speech ¶37; Annexure 4(iii)

Attract global talent with tax certainty

MAT exemption for presumptive NRs

Extend MAT exemption

Limited NR coverage earlier (as per note)

MAT exemption to all presumptive NRs

Speech ¶38; Annexure 4(iv)

Removes MAT friction for NR presumptive taxpayers

Critical minerals

Add to Schedule XII; allow deduction u/s 51

Not specified

Eligible deduction for exploration/prospecting

Annexure 4(v)

Incentivises critical mineral exploration

IFSC deduction period

Extend deduction period + post-deduction tax rate

Not specified in provided text

Deduction: 20/25 yrs (units) & 20 yrs (OBUs); post period tax 15%

Annexure 4(vi)

Enhances IFSC competitiveness

IFSC treasury centre deemed dividend

Relax deemed dividend conditions

Not specified

Not applicable if parent listed abroad + entities in notified foreign jurisdictions

Annexure 4(vii)

Facilitates treasury centre structures

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

ICDS vs IndAS

ICDS to be incorporated into IndAS; separate ICDS accounting removed

Separate ICDS requirement existed

Remove separate ICDS accounting from TY 2027-28

Speech ¶39

Reduces duplication & reconciliation

"Accountant" definition

Rationalise definition for safe harbour

Not specified

Rationalised definition

Speech ¶40

Enables broader participation / clarity

Topic name

What announced

Before rate / position

New rate / position

Para no.

Key impact

Buyback taxation head

Treat buyback as Capital Gains for all shareholders

Treated as dividend (as per annexure note)

Taxed as Capital Gains

Speech ¶41; Annexure 6(i)

Change in tax characterization & planning

Promoter additional buyback tax

Higher effective tax for promoters

Not specified in provided text

Effective: 22% (corporate promoters) / 30% (non-corporate promoters)

Speech ¶41; Annexure 6(i)

Anti-arbitrage; increases promoter cost

TCS - liquor

Rate rationalisation

1%

2%

Speech ¶42; Annexure 6(ii)

Higher TCS; cashflow impact on trade

TCS - tendu leaves

Rate reduction

5%

2%

Speech ¶42; Annexure 6(ii)

Relief to sector

TCS - scrap

Rate rationalisation

1%

2%

Speech ¶42; Annexure 6(ii)

Higher TCS; impacts scrap buyers/sellers

TCS - minerals (coal/lignite/iron ore)

Rate rationalisation

1%

2%

Speech ¶42; Annexure 6(ii)

Higher TCS; affects mining/mineral trade

LRS - education/medical

Rate reduction

5%

2%

Speech ¶7; Annexure 6(ii)

Lower TCS outflow

LRS - other purposes

No change stated

20% (above Rs 10L)

20%

Annexure 6(ii)

Continues high TCS for non-exempt purposes

Overseas tour package

Single rate

5% up to Rs 10L; 20% above (table)

2%

Speech ¶6; Annexure 6(ii)

Major reduction + simplification

STT - Futures

Increase STT

0.02%

0.05%

Speech ¶43; Annexure 6(iii)

Higher cost in F&O; "course correction"

STT - Options premium

Increase STT

0.10%

0.15%

Speech ¶43; Annexure 6(iii)

Higher trading cost

STT - Options exercise

Increase STT

0.125%

0.15%

Speech ¶43; Annexure 6(iii)

Higher cost on exercised options

MAT credit eligibility

MAT credit set-off only in new regime

Not specified

Allowed only in new regime

Speech ¶45; Annexure 5(i)

Push towards new regime

MAT credit set-off cap

Cap set-off

Not specified

Set-off limited to 25% of tax liability

Speech ¶45; Annexure 5(i)

Slower MAT credit utilisation

MAT becomes final tax

MAT final tax; no future credit accumulation

MAT credit accumulation existed

No new credit from 01.04.2026

Speech ¶46; Annexure 5(i)

Structural MAT reform

MAT rate

Reduce MAT rate

15%

14%

Speech ¶46; Annexure 5(i)

Rate cut to align with "final tax"

MAT credit life

Time limit for carry forward

Not specified

Available up to 15th year from first availability

Annexure 5(i)

Clear sunset for MAT credit

SGB capital gains exemption

Restrict exemption to original subscriber holding till maturity

Exemption broader (implied)

Only original subscriber + continuous holding till maturity; uniform for all SGB issues

Annexure 6(iv)

Secondary market buyers may lose exemption benefit

Recognised PF (Schedule XI)

Rationalise limits/conditions

Existing parity/percentage/salary-linked constraints

Remove/align as described (multiple changes)

Annexure 6(v)

Requires PF policy review (employer contribution/investment rules)

Interest deduction vs dividend/MF

Remove interest deduction

Deduction allowed subject to ceiling (implied)

No deduction for interest linked to dividend/MF unit income

Annexure 6(vi)

Impacts leveraged investment structures

Deeming income - transition rule

Clarity due to repeal (1961→2025)

Potential gaps

Deemed income rule inserted as described

Annexure 6(vii)

Prevents unintended non-taxation

Tonnage tax

Align with Inland Vessels Act, 2021

Existing provisions

Rationalised alignment

Annexure 6(viii)

Harmonisation for shipping/inland vessels

Armed forces disability pension

Specific exemption

Not specified

Explicit exemption (service + disability element), only when invalided out (not superannuation)

Annexure 6(ix)

Clear exemption; reduces disputes

RFCTLARR compulsory acquisition

Explicit exemption for individuals/HUF

Not specified

Exemption for awards/agreements under RFCTLARR (excluding sec 46)

Annexure 6(x)

Clear treatment for land acquisition cases

Clarifications (court conflicts)

Clarify DRP time-limit, TPO time-limit, DIN, reassessment notice by jurisdictional AO

Conflicting judgments

Legislative clarification in ITA 1961 & 2025

Annexure 6(xii)

Reduces litigation uncertainty

ITA 2025 technical changes

Definitions, corrections, guideline scope, NPO changes, HP nil value wording, PAN rule power etc.

Various gaps/errors/limitations

Multiple insertions/corrections as listed

Annexure 6(xiii)

Technical clean-up; compliance enablement across areas