In the Union Budget 2026, several amendments were made in the Income Tax Act, the objective of which was to simplify the rules for taxpayers and reduce the burden related to the process. The main changes include reduction in TCS rates, increase in STT, and extension in the deadline for filing revised income tax returns. The government has also extended the last date for filing ITR-3 and ITR-4 for those taxpayers who are not audited. Besides, the government has also announced measures like giving one-time opportunity to disclose foreign assets. These changes will come into effect from April 1, 2026. Let us try to explain it to you in detail.
New Income Tax Act, 2025
The new Income Tax Act, 2025, will officially be applicable to all taxpayers from April 1, 2026 (FY 2026-27). This will replace the existing Income Tax Act, 1961. However, it is important to note that there has been no change in the income tax slabs for the financial year 2026-27, and the existing slabs will continue. These changes are important because the Income Tax Act has been in force in India since 1961. But since then, there have been a lot of changes in the economy, technology and even the labor sector.
Extension in last date to file ITR
In Budget 2026, the last date for filing ITR-3 and ITR-4 has also been extended for those taxpayers who are not audited. Now they will be able to file their returns till 31st August after the end of the relevant tax year. This new deadline will also be applicable to the financial year 2025-26. However, there has been no change in the last date for filing ITR-1 and ITR-2. This date will remain the same as before, 31st July, which comes after the end of the relevant tax year. The last date for tax audit will also remain the same as before, 31st October.
Change in last date for filing revised ITR
The last date for filing revised returns has been extended from 31st December to 31st March of the concerned financial year. However, if a taxpayer files a revised return after December 31, he will have to pay additional fees. At the same time, no change has been made in the last date for filing belated returns.
Changes made in TCS
Like the previous budget, Budget 2026 has rationalized TCS rates to simplify rules, reduce delays in refunds and remove confusion among taxpayers.
The following TCS rates will be applicable from April 2026:
- Liquor Sales: TCS rate on liquor will be increased from 1 percent to 2 percent.
- Sale of tendu leaves: TCS rate on the sale of this product will be 2 percent, which is less than the earlier rate of 5 percent.
- Junk Sale: Budget 2026 has increased the TCS rate on sale of scrap from the current 1 percent to 2 percent.
- Sale of Minerals (Coal, Lignite, or Iron Ore): TCS rate on the sale of these products has been increased from 1 percent to 2 percent.
- Money sent abroad under LRS: TCS rates have been reduced from the existing double tax (5 percent and 20 percent) to a single rate of 2 percent without any limit.
- Amount sent under LRS for education and medical: For the above mentioned cases, TCS rate has been reduced from 5 percent to 2%.
Increase in security transaction tax
In a major blow to those trading futures and options (F&O) in the Indian stock market, the Union Budget has announced an increase in the securities transaction tax for the equity derivatives segment. As per the announcement, STT on futures will be increased from 0.02 per cent to 0.05 per cent, and STT on options transactions will be increased from 0.1 per cent to 0.15 per cent. These changes will also come into effect from April 2026. Securities Transaction Tax is a direct tax levied on every purchase and sale of securities (such as equity shares, futures and options) on government recognized stock exchanges.
Changes in buyback taxation
The government said that any amount received from buyback of shares will be taxed as capital gains from April 1, 2026. Earlier, the amount received from share buyback was considered as ‘deemed dividend’ and was taxed as per the applicable slab rate. However, promoter shareholders will have to pay a “differential buyback tax”, the effective rate of which will be 22 per cent for corporate promoters and 30 per cent for non-corporate promoters.
Deduction of interest expenses from dividend
According to the Union Budget 2026, from April 2026, taxpayers will no longer be able to deduct interest expenses incurred on dividend income or income earned from mutual fund units. The deductions previously allowed for such interest expenses have been removed; This means that full tax will be levied on dividend income as per the applicable slab rate, due to which the earlier limit of 20 per cent interest deduction will be removed.