The Union Budget 2026 introduced several amendments to the Income Tax Act with an aim to simplify compliance and ease procedural burdens for taxpayers.
The key changes include a reduction in TCS rates, STT hike, and an extension of the deadline for filing revised income tax returns, among others.
The government has also extended the due dates for filing ITR-3 and ITR-4 for non-audit , and announced measures such as a one-time foreign asset disclosure window. These changes take effect on 1 April 2026 and apply to the 2026-27 financial year (FY).
Here are the major changes taking effect from 1 April:
New Income Tax Act, 2025
The new Income Tax Act, 2025, officially applies to all taxpayers from 1 April 2026 onwards (FY 2026-27), replacing the existing Income Tax Act, 1961.
However, it is important to note that there have been no changes in the income tax slabs for FY 2026-27, and the existing slabs will continue.
The changes are crucial because India has had the Income Tax Act since 1961. But since then, the economy, technology, and even labour itself have changed a lot.
ITR filing due date extension
The Budget 2026 also extended the due date for filing ITR-3 and ITR-4 for to 31 August from the end of the relevant tax year. The revised deadline will also apply for FY 2025-26.
However, the deadline for filing ITR-1 and ITR-2 remains the same: 31 July, following the end of the relevant tax year. The due date for the tax audit also remains unchanged at 31 October.
Revised ITR due date changes
The due date to file a revised return was extended from 31 December to 31 March of the relevant financial year. However, taxpayers will be required to pay an additional fee to file a revised return after 31 December.
Meanwhile, the due date for filing belated returns remains unchanged.
Tax Collected at Source (TCS) changes
Similar to the previous budget, Budget 2026 rationalised TCS rates to ease compliance, reduce refund delays, and address confusion among taxpayers.
The following TCS rates will be effective from April 2026:
— Sale of alcoholic beverages for human consumption: TCS rates on alcoholic drinks will be increased from 1% to 2%.
— Sale of tendu leaves: This product will attract a TCS rate of 2%, down from the earlier rate of 5% during its sale.
— Sale of scrap: The Budget 2026 increased the TCS rate on the sale of scrap to 2%, from the current 1% figure.
— Sale of minerals (coal, lignite, or iron ore): TCS rate on the sale of these products has been hiked from 1% to 2%.
— Remittance under LRS for overseas tour package: TCS rates have been reduced to a single flat rate of 2% without threshold from the existing dual rate of 5% and 20%.
— Remittance under LRS for education and medical treatment: The TCS rate for the above has been reduced from 5% to 2%.
Securities Transaction Tax (STT) hike
In a major blow to the futures and options (F&O) traders in the Indian stock market, the Union Budget announced a hike in the Security Transaction Tax (STT) for the equity derivatives segment.
As per the announcement, will be increased to 0.05% from 0.02%, and STT on options transactions will be raised to 0.15% from 0.1%. These changes will also be applicable from April 2026 onwards.
Securities Transaction Tax is a direct tax levied by the government on every purchase and sale of securities, such as equity shares, futures and options, on recognised stock exchanges.
Buyback taxation changes
In another major change, the government said that any amount received from the buyback of shares will be taxed as capital gains from 1 April 2026. Earlier, the proceeds from a share buyback were treated as deemed dividends and taxed at the applicable slab rates.
However, promoter shareholders will have to pay a “differential buyback tax” with an effective rate of 22% for corporate promoters and 30% for non-corporate promoters.
Deduction of interest expenses from dividends
Starting April 2026, taxpayers can no longer deduct interest expenses incurred to earn dividend income or income from mutual fund units, as per the Union Budget 2026.
Previously allowed deductions for such interest expenditures have been removed, meaning dividend income will be fully taxed at the applicable slab rates, removing the previous 20% interest deduction limit.