Union Finance Minister Nirmala Sitharaman on Sunday said that the Income Tax Act 2025 will come into effect from April 1, 2026, and the I-T forms have been redesigned such that ordinary citizens can comply without difficulty for ease of living.
The new measures include exemption on insurance interest awards, nil deduction certificates for small taxpayers, and extension of the ITR filing deadline for non-audit cases to August 31.
Individuals with ITR 1 and ITR 2 will continue to file I-T returns till July 31.
"In July 2024, I announced a comprehensive review of the Income Tax Act 1961. This was completed in record time, and the Income Tax Act 2025 will come into effect from April 1, 2026. The forms have been redesigned such that ordinary citizens can comply without difficulty, for) ease of living," she said while presenting the Budget 2026-27
In a move that directly eases cash-flow pressure on individuals making overseas payments, the Union Budget announced lower tax collection at source across key categories.
"I propose to reduce the TCS rate on the sale of overseas tour programme packages from the current 5 per cent and 20 per cent to 2 per cent without any stipulation of amount. I propose to reduce the TCS rate for pursuing education and for medical purposes from 5 per cent to 2 per cent," said Sitharaman.
She clarified withholding on services, adding that "supply of manpower services is proposed to be specifically brought within the ambit of payment contractors for the purpose of TDS to avoid ambiguity".
"Thus, TDS on these services will be at the rate of either 1 per cent or 2 per cent only," she mentioned during her Budget speech.
The Budget also proposes a tax holiday for foreign cloud companies using data centres in India till 2047.
Essential Medicines: 17 life-saving drugs, particularly those for treating diabetes and cancer, will become more affordable due to new customs duty relief.
Mobile Phones: Prices are set to drop as the government provides relief on components and capital goods used in manufacturing.
EV Batteries: BCD on Lithium-ion (Li-ion) cells is exempt to drive the green energy transition.
Leather & Textiles: Raw materials like Wet Blue leather and specified inputs for textiles are seeing duty cuts, making finished leather products and apparel cheaper.
Marine Products: The duty-free import limit for inputs used in seafood processing (like shrimp feed) has been tripled from 1% to 3% of the FOB value. Sports Equipment: The
Finance Minister specifically noted that sports goods will be more affordable to encourage athletic participation.
Solar panels to be cheaper.
Overseas tourism packages: TCS rate cut from 5–20% to 2%
Foreign education: Lower TDS under LRS for education expenses
Alcoholic liquor scrap and certain minerals: Duty reduced from 5% to 2%
Shoe upper exports: Duty-free imports allowed
Energy transition equipment: Basic customs duty (BCD) exempt
Solar glass ingredients: BCD exempt
Capital goods for critical minerals: BCD exempt
Components and parts for civilian aircraft manufacturing: BCD exempt
Microwave ovens: BCD exempt
Personal use imports: BCD reduced from 20% to 10%
Drugs for rare and cancer diseases: BCD exempt
Fish catch by Indian fishermen in Indian waters: BCD exempt
Goods imported for nuclear power projects: BCD exempt
Income tax misreporting: Penalty equal to 100% of the tax amount
Non-disclosure of movable assets: Now attracts a penalty
Stock options and futures trading: Securities Transaction Tax raised from 0.02% to 0.05%
FM Sitharaman stated that tax-paying timeline will be staggered and ITR can be revised for an extended timeline by paying a small amount.
"For 1-time six-month foreign asset disclosure scheme for a special set of people including students who didn’t disclose overseas assets/income (limit Rs 1 crore) and those who did disclose such assets or income (asset value up to Rs 5 crore),” she further said.
"I propose that any interest awarded by the motor accident claims tribunal to a natural person will be exempt from income tax and any TDS on this account will be done away with."
I propose to reduce TCS rate on the sale of overseas tour program package from the current 5% and 20% to 2% without any stipulation of amount.
...The Government has accepted 16th Finance Commission recommendations to retain the vertical share of devolution at 41%. I have allocated Rs 1.4 lakh crores for states for FY2026-27.
I propose to reduce TCS rate for pursuing education and for medical purposes under the liberalised remittance scheme, popularly known as LRS, from 5% to 2%
"I propose a scheme for small taxpayers wherein a rule-based automated process will enable obtaining a lower or nil deduction certificate instead of filing an application with the assessing officer. For the ease of taxpayer holding securities in multiple companies, I propose to enable depositories to accept Form 15G or Form 15H from the investor and provide it directly to various relevant companies."
"I propose to extend time available for revising returns from 31st December to up to 31st March with the payment of a nominal fee. I also propose to stagger the timeline for filing of tax returns - individuals with ITR 1 and ITR 2 will continue to file till 31st July and non-audit business cases or trust are proposed to be allowed time till 31st August"
"I propose to reduce TCS rate on sale of overseas tour program packages from current 5% and 20% to 2% without any stipulation of amount. I propose to reduce the TCS rate for pursuing education and medical purposes under the liberalised remittance scheme from 5% to 2%..."