In Budget 2026, the government did not make any major announcements related to income tax rates or slabs. However, a few important procedural and tax-related changes were announced. One key change is that the deadline to file revised income tax returns has been extended from December 31 to March 31. Also, tax on certain payments made abroad has been reduced from 5 percent to 2 percent.
Here are the five main income tax changes announced in Budget 2026:
1. New Income Tax Law from April 1
The central government will replace the old Income Tax Act of 1961 with a new Income Tax Act, 2025. This new law will come into effect from April 1, 2026. There is no change in tax rates or slabs. The main aim is to simplify tax rules and make the return filing process easier for taxpayers.
2. Lower Tax on Payments Made Abroad
Payments sent abroad for education and medical treatment will now attract lower tax. The government has reduced Tax Collected at Source (TCS) from 5 percent to 2 percent. TCS on foreign tour packages has also been reduced from earlier rates of 5 percent and 20 percent to a uniform 2 percent.
3. No Need to Apply for TDS Exemption
Taxpayers will no longer need to submit a separate application to avoid Tax Deducted at Source (TDS). If a person has no income tax liability as per rules, TDS will not be deducted automatically. Earlier, people had to submit Form 15G (for those below 60 years) or Form 15H (for senior citizens) to claim this benefit.
4. Revised Returns Can Be Filed Till March 31
The time limit to file revised Income Tax Returns (ITR) has been extended. Taxpayers can now correct mistakes in their returns and file a revised return till March 31 instead of December 31, by paying a nominal fee.
5. Futures and Options Trading Becomes Costlier
Trading in futures and options will become more expensive. The Securities Transaction Tax (STT) on futures trading has been increased from 0.02 percent to 0.05 percent. STT on options has also been raised to 0.15 percent.
No Change in Tax Regime Limits
Under the old tax regime, income up to ₹2.5 lakh remains tax-free. However, under Section 87A, taxpayers can still get tax relief on income up to ₹5 lakh.
If you choose the new tax regime, income up to ₹4 lakh remains tax-free. Under Section 87A, salaried taxpayers can get tax exemption up to ₹12.75 lakh, while others can get exemption up to ₹12 lakh.
Why There Is No Major Change
Tax experts say the government had already increased the tax-free income limit under the new tax regime from ₹7 lakh to ₹12 lakh in the previous budget. Because of this big relief earlier, there was little chance of further changes this year.
