With the start of the financial year from 1 April 2026, several key changes to tax deducted at source (TDS) and tax collected at source (TCS) have come into effect. The new rules aim to save time, reduce manual errors, avoid mismatches, and ensure faster processing.
The reforms affect a wide range of financial transactions, including foreign remittances, property transactions, and investment income. Here are the key changes that taxpayers, especially NRIs, investors, international students, and travellers should be aware of:
Lower TCS rate on foreign remittances and overseas travel expenses
On the tax deducted at source (TDS) front, the government has reduced TDS rates to ease the upfront tax burden on people.
- Foreign travel packages: Such deals will now be taxed at a flat 2% rate, replacing the earlier 5% rate (up to ₹10 lakh) and 20% for amounts above that threshold.
- Education and medical remittances abroad: TCS rate on such expenses has been reduced from 5% to 2% on applicable amounts. These categories previously attracted a 5% TCS of more than ₹10 lakh.
These changes are expected to provide massive relief to travellers and households with international financial commitments while maintaining reporting visibility for tax authorities. This overhaul was announced during the Union Budget 2026 and has been implemented from the beginning of the new financial year.
Property deals with NRIs get simpler
Another major relief has been announced for resident buyers purchasing property from non-resident Indians (NRIs). From 1 October 2026, buyers will no longer be required to obtain a tax deduction account number (TAN).
Instead, the buyer’s Permanent Account Number (PAN) will be sufficient for fulfilling TDS obligations. This major change is expected to significantly reduce procedural hurdles and make property transactions involving NRIs more seamless for resident buyers.
A unified form for small investors
A big shift for retail investors is the introduction of a single TDS non-deduction declaration, which is expected to reduce paperwork.
Both Form 15G and Form 15H have now been replaced by a single, unified Form 121. The old forms were particularly used by individuals and senior citizens with low taxable income to prevent unnecessary TDS deductions.
Meanwhile, Form 121 serves the same purpose as the older forms. A taxpayer can use it to avoid TDS if their tax liability for the year is nil. Based on this declaration, the payer will not deduct tax on income or credit due to the taxpayer.
Previously, taxpayers were required to select one of the two forms based on their age. Form 15G was meant for people below 60 years of age, and Form 15H was used by senior citizens. Now that the old forms have been discontinued, this age-based distinction is no longer applicable.
The basic exemption limit under the old tax regime is ₹2,50,000 for individuals below 60 years of age and ₹3,00,000 for senior citizens. Under the new tax regime, the limit is ₹4,00,000 for all individuals.