Budget 2026 Highlights Relted to Income Tax and GST

Union Budget 2026 maintains status quo on income-tax slabs under both old and new regimes while easing compliance through extended timelines and rationalisation measures. Non-audit business taxpayers get an ITR due date of 31 August, and revised returns can be filed up to 31 March with modest late fees. TCS rates are rationalised (generally aligned at 2% for specified items and certain LRS remittances), and TDS provisions are simplified—covering manpower under section 194C, enabling electronic lower/nil TDS certificates, exempting MV Act compensation interest from TDS, and waiving TAN for resident buyers purchasing property from non-residents. MAT becomes a final tax at 14%, with limited set-off of existing credits under the new regime. Buy-backs shift from dividend taxation to capital gains, STT on derivatives rises, and penalties/prosecution are rationalised. On GST, reforms allow flexible post-sale discounts, shift place of supply for intermediaries to the recipient’s location, expand refunds, and introduce a transitional appellate mechanism for advance rulings to ensure consistency.

BUDGET 2026 HIGHLIGHTS 

A. DIRECT TAXES:

1. No Change in Income-tax slab for Individuals, HUFs, AOP & BOI:

– For Individuals less than 60 Years of age

i. Income-Tax Rate for the Financial Year 2026-27 – NEW REGIME:

ii. Income-Tax Rate for the Financial Year 2026-27 – OLD REGIME:

2. Extension of Due Date for Non-Audit Taxpayers:

For Non-Audit Taxpayers who are in the business or profession (except for those whose file ITR-1 & 2), the due date for filing ITR (ITR-3 & 4) is extended to 31^st August of the following year. [Applicable from FY 2025-26 / AY 2026-27]

3. Extension of revised return due date:

The due date of filing of revised return have been extended from 31^st December of the following year to 31^st March of the following year. However, after 31^st December, following late fees are applicable for revised return filing till 31^st March:

4. Changes in TCS Rates:

Following are the new / Proposed TCS Rates as under:

5. Changes in TDS Provisions:

– Exemption on interest received by the individual on the compensation under the motor vehicle Act and no TDS is to be deducted under the Motor Vehicle Act, 1988.

– Supply of manpower services specifically included under contractor payments under 194C. TDS rate will be 1% (for individuals / HUF) and 2% (for others).

– To improve ease of compliance, transparency and speed process and to reduce compliance burden on taxpayers, it is proposed to introduce an electronic application and issuance system for certificates for deduction of income-tax at lower or nil rate.

This amendment will take effect from 01^st April, 2026.

– Relaxation from requirement to obtain TAN for purchase of Immovable property from a Non-resident. Deduction will be through resident buyer’s PAN-based challan (No TAN required).

6. Various penalties and prosecution proceedings have been rationalised and in some of the cases, decriminalised.

7. Minimum Alternate Tax (MAT):

• Proposed that no fresh MAT credit to be allowed now (no further accumulation from 01.04.2026) and have been made final tax. Set-off of existing Mat credit will be permitted only under the new tax regime –

a) For domestic companies- limited to 25% of tax liability;

b) For Foreign companies- limited to the excess of normal tax over MAT in the relevant year.

• Rate reduced from 15% to 14%.

8. Buy-Back of Shares:

• Earlier, Buy-back of shares taxed as Dividend Income. Now, after the amendment comes into effect, buy-back of shares will be taxed as Capital Gain in the hands of shareholders.
• Now, Promoters have to pay additional buy-back tax:

– Corporate Promoters: 22% effective tax

– Non-Corporate Promoters: 30% effective tax

9. Increase in Securities Transaction Tax (STT) on Futures & options:

B. GOODS AND SERVICES TAXES:

1. Post-sale Discounts:

Earlier Provision: Post-sale discounts must be pre-agreed and specifically linked to individual tax invoices.

Proposed Amendment: permitting post-sale discounts by way of issuance of credit notes and no such requirement of pre-agreed and specifically linking to individual tax invoices.

2. Place of Supply – Intermediary Services:

Earlier provision: Earlier, the place of supply in case of intermediary services was the location of the supplier of services i.e. intermediary.

Proposed amendment: After the amendment, the place of supply in case of intermediary service shall be the location of the recipient of services.

3. Refunds under GST:

Amendment proposed to extend the benefit of provisional refund to cases of inverted duty structure also.

Amendment proposes to remove the threshold limit for sanction of refund claims in respect of export of goods with payment of tax, ensuring that even small-value refund claims shall be processed.

4. Advance ruling – Constitution of National Appellate Authority:

The amendment proposed in section 101A provides an interim mechanism for disposal of appeals against advance rulings by empowering the Central Government, pending constitution of the National Appellate Authority, to authorise an existing authority or tribunal to hear such appeals under section 101B.

It is further clarified that where such authority or tribunal is empowered, the detailed procedural provisions contained in sub-sections (2) to (13) of section 101A shall not apply.

This amendment seeks to address the long-standing absence of a national-level appellate forum for advance rulings, which had resulted in conflicting rulings across States and legal uncertainty for taxpayers, particularly those having multi-State operations.

The provision, effective from 1 April 2026, is a transitional measure aimed at ensuring consistency and certainty in the advance ruling framework until the permanent appellate authority is constituted.