To enhance the taxpayer experience, the Union Budget 2026-27 unveiled various direct tax measures, with the Income Tax Act, 2025, set to be effective from April 1, 2026. The revised rules and forms will be introduced gradually to allow taxpayers ample time to understand and fulfill their obligations. Finance Minister Nirmala Sitharaman also suggested exempting Income Tax on interest awarded by the Motor Accident Claims Tribunal to individuals, eliminating any TDS on such amounts.
The Budget for 2026-27 plans to lower the TCS rates on the sale of overseas tour packages to 2 percent, removing the current 5 percent and 20 percent thresholds. Additionally, it aims to reduce the TCS rates for educational and medical expenses under the Liberalised Remittance Scheme (LRS) from 5 percent to 2 percent. The proposal includes bringing the supply of manpower services under TDS regulations to ensure clarity, with TDS rates set at 1 percent or 2 percent.
Furthermore, a simplified process is suggested for small taxpayers to obtain lower or zero deduction certificates through an automated system, avoiding the need to approach assessing officers. The Budget also aims to streamline the process for taxpayers holding securities in multiple companies by allowing depositories to directly submit Form 15G or Form 15H to relevant firms. It extends the deadline for revising returns up to March 31 with a nominal fee, from the previous December 31 deadline.
The Budget introduces staggered timelines for filing tax returns, with individuals filing ITR 1 and ITR 2 returns by July 31, and non-audit business cases or trusts given until August 31. It proposes deducting TDS on the sale of immovable property by non-residents through the buyer’s PAN-based challan, eliminating the need for a TAN. To address practical issues faced by small taxpayers like students, young professionals, and relocated NRIs, a one-time 6-month foreign asset disclosure scheme is suggested for disclosing income or assets below a specified threshold.
