Budget 2026- Yuva Shakti-Driven Budget

The Union Budget 2026–27, guided by the vision of Viksit Bharat, prioritises inclusive growth, ease of compliance, and trust-based governance without altering income-tax slabs under the new regime. Direct tax proposals focus on rationalisation—extending due dates for employee PF/ESI deductions to the return filing date, exempting interest on Motor Vehicles Act compensation from tax and TDS, enabling electronic issuance of lower/nil TDS certificates, removing TAN requirements for resident buyers purchasing property from non-residents, and streamlining declarations for no TDS via depositories. Compliance relief includes revised return timelines, expanded updated return scope, a voluntary foreign asset disclosure scheme for small taxpayers, and conversion of penalties into fixed fees. MAT is restructured as a final tax at 14% with limited set-off under the new regime. TCS rates are rationalised, STT increased, SGB exemption narrowed to original holders, and buybacks taxed as capital gains. On GST, reforms ease post-sale discounts, expand refunds, align intermediary place of supply to recipients, and introduce an interim appellate mechanism—collectively reducing disputes and improving certainty.

BACKGROUND

MOTTO

Viksit Bharat, balancing ambition with inclusion

• Transform aspiration into achievement
• Potential into performance

YUVA SHAKTI-DRIVEN BUDGET

Key points

• Accelerate and sustain economic growth
• Fulfil aspirations of our people
• Vision of Sabka Sath, Sabka Vikas
• Sustaining Economic Growth
• Strengthening the foundations of growth
• People-Centric Development
• Trust-based Governance
• Ease of Doing Business and Ease of Living
• Fiscal matters

Focus on these sectors-

• Tax Reforms to boost Manufacturing Sector
• Three-pronged approach to help MSMEs grow as ‘Champions’
• Renewing the emphasis on Services Sector
• Tax Reforms to boost Services Sector
• Setting up of High Level Committee on Banking for Viksit Bharat to align with India’s next growth phase.
• Increasing farmer’s income by enhancing productivity in agricultural and allied sectors
• Ensuring long-term energy security and stability
• Urbanisation: City Economic Regions

SECTION-I

DIRECT TAXES

RATES OF INCOME TAX FOR A.Y. 2026-27

Tax rates under section-115BAC- New regime- No change in tax slabs

Rationalising the due date to credit employee contribution by the employer to claim such contribution as deduction

• Section-29 Clause(e)(i) of sub-section (1) of the said section provides for deduction of any amount of contribution received by the assessee being an employer, from an employee to which the provisions of section 2(49)(o) apply, if such amount is credited by the assessee to the account of the employee in the relevant fund or funds by the due date.
• Earlier due date was the date by which the assessee is required as an employer to credit employee contribution to the account of an employee in the relevant fund under any Act, rule, order or notification issued under it or under any standing order, award, contract of service or otherwise.
• Proposed Amendment- the due date for the said clause shall be the due date of filing of return of income under section 263(1) of the Act.
• Effective date- 01.04.2026

Exemption on interest income under the Motor Vehicles Act, 1988

• Exiting section 11 of the Income Tax Act 2025 inter alia provides for the exemption of income of persons included in Schedule III subject to the fulfilment of conditions specified therein.
• The provisions of Motor Vehicles Act, 1988 inter alia provides for compensation and interest on such compensation to be awarded by the tribunal under said Act, to an individual or his legal heir, on account of death or on account of permanent disability or any bodily injury under the said Act.
• Proposed Amendment- to provide exemption to an individual or his legal heir, on any income in the nature of interest under the Motor Vehicles Act, 1988.
• Further no TDS will be deducted on the amount of interest on compensation awarded.
• Effective date- 01.04.2026

Enabling electronic verification and issuance of certificate for deduction of income-tax at lower rate or no deduction of income-tax

• Section 395 of the Act pertains to issuance of certificates for deduction of tax at source (TDS) and tax collection at source (TCS) at nil or lower rate.
• Presently payee has to make an application before the AO. After verification of the documents, total income of the recipient, certificate is issued at lower/NIL rate.
• Proposed Amendment-File the application for lower/NIL rate electronically before the prescribed Income Tax authority which may issue the certificate on fulfillment of conditions as may be prescribed.
• Effective date- 01.04.2026

Relaxation from requirement to obtain tax deduction and collection account number (TAN) by a resident individual or HUF, where the seller of the immovable property is a non –resident

• Present situation- If a person buys an immovable property from a resident seller, the person is not required to obtain (TAN) to deduct tax at source. However, where seller of the immovable property is a non-resident, the buyer is required to obtain TAN to deduct tax at source. This creates unnecessary compliance burden for the buyer, as he would need TAN for a single transaction.
• Proposed Amendment -No need to obtain TAN if buyer is resident Individual or HUF and seller if non-resident.
• Effective date- 01.10.2026

Enabling filing of declaration for no deduction to a depository

• Present situation-Filing of written declaration by assessee for no deduction of TDS to the person responsible for paying any income i.e . dividend, income etc.
• Investors earning income from multiple securities need to submit separate forms earlier.
• Proposed Amendment- It is proposed to allow filing of the declaration to the depository which in turn shall provide such declaration to the person responsible for paying such income. Further the time limit for furnishing the declaration received by them to the prescribed Income tax authority have been changed from monthly basis to quarterly basis. (only securities held with registered stock exchange in India)
• Effective date- 01.04.2027

Rationalising due dates for filing of return of Income

• Effective date- 01.04.2026

PERIOD FOR FILING REVISED RETURN

• Present situation- Time limit for filing revised return- 9 months from the end of the relevant tax year.
• Proposed Amendment-12 months from the end of the relevant tax year.
• To pay by way of fee, a sum of ₹ 1000, if the total income of such person does not exceed ₹ 500000 and a sum of ₹ 5000, in any other case.

Scope of filing of updated return in the case of reduction of losses

• Present situation- Updated return cannot be filed where there is reduction of losses.
• Proposed Amendment- It is proposed to allow filing of updated return where there is reduction of losses in comparison to the original return.
• Effective date- 01.04.2026

Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 (FAST-DS 2026)

• In order to facilitate voluntary compliance and enable resolution of such legacy cases of small taxpayers, it is proposed to introduce a time-bound scheme for declaration of foreign assets and foreign-sourced income, with payment of tax or fee based on the nature and source of acquisition and grant of limited immunity from penalty and prosecution under the Black Money Act in respect of matters covered by the declaration. Cases involving prosecution or proceeds of crime are proposed to be excluded
• The proposed scheme shall form part of the Finance Bill, 2026 and shall come into force from the date to be notified by the Central Government.

Rationalisation of Penalties into Fee

• Effective date- 01.04.2026

Rationalization of Minimum Alternate Tax provisions

• It is proposed that the tax paid under provisions of MAT be made as final tax in the old regime and no new MAT credit may be allowed. However, the tax rate of MAT has been reduced to 14% of book profit from the existing 15%. Further, set-off of MAT credit may be allowed only in the new tax regime for domestic companies to the extent of 25% of the tax liability. In the case of foreign companies, set off is proposed to be allowed to the extent of the difference between the tax on the total income and the minimum alternate tax, for the tax year in which normal tax is more than MAT.
• Effective date- 01.04.2026

Rationalisation of TCS rates

• Effective date- 01.04.2026

 Exemption for Sovereign Gold Bond

• The provisions of section 70(1)(x) of the Act provide an exemption from capital gains tax in respect of income arising from redemption of Sovereign Gold Bonds issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015. Sovereign Gold Bonds have been issued by the Reserve Bank of India on a recurring basis through multiple series notified from time to time, each constituting a separate issuance.
• Proposed Amendment- Exemption shall be available only where the Sovereign Gold Bond is subscribed to by a subscriber at the time of original issue and is held continuously until redemption on maturity.
• Effective date- 01.04.2026

Increase in tax rates of Securities Transaction Tax(STT)

• It is proposed to increase the rate of STT on sale of an option in securities from 0.10 per cent to 0.15 per cent of the option premium, on sale of an option where the option is exercised from 0.125 per cent to 0.15 per cent of the intrinsic price, and on sale of a future in securities from 0.02 per cent to 0.05 per cent of the traded price.
• Effective date- 01.04.2026

Taxation of buyback of shares

• Presently consideration received by a shareholder on buy-back of shares by a company is treated as dividend income under section 2(40)(f) of the Act and taxed accordingly, while the cost of acquisition of the shares extinguished on buy-back is recognised separately as a capital loss under section 69.
• It is proposed that consideration received on buy-back shall be chargeable to tax under the head “Capital gains” instead of being treated as dividend income.
• In the case of promoters, the effective tax liability on gains arising from buy-back shall be thirty per cent, comprising tax payable at the applicable rates together with an additional tax.
• In case of promoter companies, the effective tax liability will be 22%.
• Effective date- 01.04.2026

SECTION-II

INDIRECT TAXES

AMENDMENTS IN THE CGST ACT, 2017

• Sub-section (3) of section 15 of the Central Goods and Services Tax Act, 2017 is being amended to do away with the requirement of linking the post-sale discount with an agreement and to refer to issuance of credit note under section 34 where the input tax credit is reversed by the recipient.
• Section 34 of the Central Goods and Services Tax Act, 2017 is being amended so as to include the reference of section 15 in the said section.
• Sub-section (6) of Section 54 of the Central Goods and Services Tax Act, 2017 is being amended to extend the provisions of provisional refund to refunds arising out of inverted duty structure.
• Sub-section (14) of Section 54 of the Central Goods and Services Tax Act, 2017 is being amended to remove the threshold limit for sanction of refund claims in case of goods exported out of India with payment of tax.
• Sub-section (1A) is being inserted in Section 101A of the Central Goods and Services Tax Act, 2017 to provide that the Central Government may, pending the constitution of the National Appellate Authority, by notification empower an existing Authority, for hearing appeals under section 101B of the CGST Act, 2017; and to provide that the provisions of sub-sections (2) to (13) shall not be applicable where a Tribunal has been so empowered under sub-section (1A). An explanation to sub-section (1A) is also being inserted to clarify that the existing Authority also includes a tribunal.
• Clause (b) of sub-section (8) of section 13 of the Integrated Goods and Services Tax Act, 2017 is being omitted so as to provide that the place of supply for “intermediary services” will be determined as per the default provision under section 13(2) of the IGST Act.

(Source- Finance Bill 2026)