Union Budget 2026 New Income Tax Rules: What Changes, What Stays, What You Should Do?

On February 1, 2026, Finance Minister Nirmala Sitharaman unveiled the Union Budget 2026-2027. Starting on April 1, 2026, the 65-year-old 1961 Act will be taken over by the Income Tax Act, 2025, which is the major structural change.

Union Budget 2026 - Key Tax Announcements

• There were no changes to the income tax slabs or rates for either the New or Old Tax Regimes. The structure remains as follows for the New Tax Regime (FY 2026-27). Due to the Rs 60,000 rebate under Section 87A, income up to Rs 12 lakh effectively remains tax-free. For salaried individuals, this limit is Rs 12.75 lakh including the standard deduction of Rs 75,000.
• Remittance (TCS) Cuts: The Tax Collected at Source (TCS) on overseas tour packages and remittances for education and medical purposes has been slashed to a flat 2% (down from as high as 20% in some cases).
• Motor Accident Claims: Interest awarded by the Motor Accident Claims Tribunal is now fully exempt from income tax.
• Disability Pension: Exemption has been proposed for disability pensions received by Armed Forces members who were invalided out of service.
• Foreign Assets: A one-time 6-month disclosure window was announced for small taxpayers (students, relocated NRIs, etc.) to report foreign assets without heavy penalties.
• The due date for filing revised returns has been extended to March 31 (with a nominal fee). For non-audit businesses and trusts, the ITR filing deadline is now August 31.
• Securities Transaction Tax (STT) on Futures was raised to 0.05% (from 0.02%), and on Options premium to 0.15% (from 0.10%).
• The sale of shares via buybacks will now be taxed as Capital Gains in the hands of the shareholders rather than being taxed at the company level.
• Property buyers no longer need a TAN to deduct TDS when buying from an NRI; a PAN-based challan will now suffice.
• The government plans to release redesigned, user-friendly ITR forms under the new Act to reduce the need for professional assistance.
• Simplified Forms: The government plans to release redesigned, user-friendly ITR forms under the new Act to reduce the need for professional assistance.
• Minimum Alternate Tax (MAT) is being transitioned into a "final tax," with the rate reduced from 15% to 14%.

How will Budget 2026 benefit taxpayers? Explained In 8 points

As per CA (Dr.) Suresh Surana, here's how taxpayers are going to benefit from the 2026 Budget.

1. Section 263 of the Income-tax Act, 2025 ('ITA 2025') [corresponding to section 139 of the Income-tax Act, 1961 ('ITA 1961')] provides for a statutory framework prescribing the classes of persons required to file returns, the applicable due dates, and the various categories of returns that may be furnished, including original returns, belated returns, revised returns, and updated returns.

2. Section 263(5) of the ITA 2025 (corresponding to section 139(5) of the ITA 1961) provides for the filing of a revised return of income. It permits a person who has furnished a return under section 263(1) or section 263(4) - Belated Return of the ITA 2025 (corresponding to sections 139(1) and 139(4) of the ITA ) to revise such return upon discovery of any omission or wrong statement in the original or belated return.

Under the existing provisions, such revised return is required to be furnished within nine months from the end of the relevant tax year, or before completion of assessment, whichever is earlier. The scope of section 263(5) (corresponding to section 139(5) of the ITA 1961) enables taxpayers to file a revised return in order to rectify omissions or incorrect statements relating to income, deductions, exemptions, losses, or other particulars disclosed in the return of income.

3. It is proposed to extend the prescribed time limit for filing a revised return from the existing nine months to twelve months from the end of the relevant tax year. At present, the time limits for filing belated returns and revised returns coincide, both being nine months from the end of the tax year.

As a result, taxpayers filing a belated return towards the end of the permitted period do not have any effective opportunity to revise such return. The proposed extension seeks to address this practical constraint by allowing an additional window only for revised return even and not for belated return.

4. Accordingly, section 263(5) of the ITA 2025 is proposed to be amended to increase the time limit for filing a revised return to twelve months from the end of the relevant tax year. Further, it is proposed to levy a fee under section 428(b) of the ITA 2025 in respect of revised returns filed beyond nine months from the end of the relevant tax year.

5. These amendments shall take effect from 1 April 2026 and shall apply in relation to tax year 2026-27 and subsequent tax years.

6. Since section 263 of the ITA 2025 corresponds to section 139 of the ITA 1961, parallel amendments are also proposed under the 1961 Act. In particular, section 139(5) of the ITA 1961 is proposed to be amended on similar lines to extend the time limit for filing revised returns. Additionally, a corresponding fee is proposed to be introduced under section 234I of the Income-tax Act, 1961 for revised returns filed beyond the specified period.

7. The amendments to the Income-tax Act, 1961 shall come into force from 1 March 2026 and shall apply in relation to Assessment Year 2026-27 (Previous Year/ Financial Year 2025-26).

8. The proposal to extend the time limit for filing revised returns and to rationalise return-filing timelines would provide taxpayers sufficient time to identify and correct inadvertent errors or omissions in their returns, thereby improving the overall accuracy of tax filings. Further, it would also allow voluntary correction of errors through revised returns and reduce litigation.