- By Nidhi Giri
- Sun, 01 Feb 2026 12:34 PM (IST)
- Source:JND
Budget 2026: Finance Minister Nirmala Sitharaman announced major changes related to income tax in Budget 2026. The new Income Tax Act 2025 will come into effect from April 1, 2026. It will replace the old 1961 law, which had been in place for 60 years and was outdated and complex. The new Act is written in simple language with sections and texts reduced by approximately 50 per cent. New rules and forms will be notified soon, giving taxpayers time to prepare. Meanwhile, no changes have been made to the income tax slabs. FM Sitharaman also proposed to increase the time limit for filing revised IT return from December 31 to March 31, on payment of nominal fee.
Other Key Announcements
-The deadline for revising ITR has been extended to March 31, however, some small fee will have to be paid as penalty.
-The deadline for filing ITR-1 and ITR-2 will remain July 31, there is no change.
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-The TCS rate on overseas tour packages has been reduced to just 2 per cent, from 5 per cent to 20 per cent earlier.
-A 6-month foreign asset disclosure scheme will be introduced for small taxpayers, which will provide an opportunity to disclose their foreign assets.
-TDS will be levied on sale of property by non-residents.
-The penalty for income misreporting will now be 100 per cent of the tax amount, which means the strictness will increase.
-Simplified income tax rules will be notified soon.
Relief For Small Taxpayers
A six-month Foreign Asset Disclosure Scheme has been introduced for small taxpayers such as students, tech professionals, and relocated NRIs. This allows them to voluntarily disclose and regularize foreign assets or income without significant penalties.
Some More Announcements In Budget
-The Minimum Alternate Tax (MAT) rate has been reduced from 15 per cent to 14 per cent. From April 1, 2026, MAT will be the final tax, and no credit will be available.
-No interest will be charged on the penalty amount during the appeal before the first appellate authority, irrespective of the outcome of the appeal.
-Notified cooperatives get 3 years tax exemption on dividend income earned on investments made till January 31, 2026.
-In healthcare, the capacity of district hospitals will be increased by 50 per cent, emergency and trauma care centres will be built.
-Ecologically sustainable mountain trails will be created in Himachal Pradesh, Uttarakhand, Jammu and Kashmir, Araku Valley (Eastern Ghats) and Western Ghats.
The new tax act will eliminate old complexities, simplify ITR filing, and provide greater relief for minor errors. These announcements will make the tax system transparent, simple, and compliance-friendly. Small taxpayers will receive significant relief, increase honest reporting of foreign assets, and reduce litigation. The middle class, youth, and ordinary people will benefit from this.