Finance Minister Nirmala Sitharaman showed the Union Budget for 2026-27, and didn’t alter personal income tax rates or the amounts in the tax brackets for people who get a salary, or for middle-income people who pay taxes. The main news wasn’t a lowering of tax rates, but changes to how things are done and what you have to do to follow the rules – with a big update to when income tax returns are due, and a completely new Income Tax Act going into effect on April 1, 2026.
What’s the same for salaried people who pay taxes
Tax amounts and rates aren’t changing in the new budget, so people who get a salary won’t get any quick help with headline tax rates. The normal deductions and the current bracket amounts in the new system weren’t changed.
People who pay taxes who were hoping for joint taxation for couples, or lower bracket rates, won’t find those in this budget. The focus is instead on making it easier to follow the rules and file returns, instead of bringing down the tax rates themselves.
New dates for ITR and when to file
The government gave people more time to correct income tax returns, letting people who pay taxes file corrected returns up to March 31 of the year they are being assessed, by paying a small fee. This gives more room to fix mistakes after the tax year ends.
The yearly filing dates have been spread out to make following the rules simpler. ITR-1 and ITR-2 returns for people will be due by July 31. ITR-3 and ITR-4, along with cases where an audit is needed, will be due by August 31. These different dates are meant to cut down on the rush at the last minute and on problems when the government is processing the returns.
The new Income Tax Act of 2025 and changes to following the rules
The Income Tax Act of 2025 will start on April 1, 2026, and will come with simpler rules and returns which have been redesigned. The goal is to make it easier for normal people and companies to follow the rules.
The rules about punishments and going to court were also made stricter. Not reporting income correctly could mean a big punishment, and the rules about going to court will be made sensible to still discourage serious crimes, but make it easier to follow the rules for small mistakes.
Reporting foreign holdings and a one-time deal for small taxpayers
A one-time window of six months has been suggested for people who pay small amounts of tax to report holdings overseas and income from them which is below a certain amount. This deal is aimed at two groups: those who didn’t report income or holdings from overseas, and those who did pay tax on income from overseas, but didn’t report the holding they bought with the money.
For certain overseas holdings up to a limit, the tax and punishment structure includes a charge of 30% of the fair market value, and another 30% instead of a punishment. People who follow the rules under this deal won’t be prosecuted. This is a choice for people who pay taxes to weigh against the risk of not following the rules.
TDS, TCS changes, IT sector and capital market measures
TCS rates were brought down to 2% from 5% for trips overseas and for money sent under the relaxed Remittance Scheme, making it cheaper for people going abroad and for overseas education or medical payments. TDS on providing manpower will be charged under Section 194C at the rates which apply, of 1% or 2%.
The tax system for IT services had big changes: all services will be put into one IT services group, the amount of turnover needed goes up from ₹300 crore to ₹2,000 crore, and a ‘safe harbour’ margin of 15.5% is set. Faster dates for Advance Pricing Agreements were made shorter, and a tax holiday for foreign cloud service companies was extended to 2047.
Taxation in the capital market was also changed: buybacks will be taxed as capital gains for all kinds of shareholders. People who control a company face an extra tax on buybacks of 22% for companies, and 30% for those who aren’t companies.
Practical next steps for taxpayers
People who get a salary and other people who pay taxes should look over their current filings and plan to use the longer time to correct returns if they need to. Those with overseas holdings which haven’t been reported should look at the one-time deal with a tax advisor. Businesses in IT and capital markets must look at the new amounts and buyback rules to change how they follow the rules and plan. Be alert for notices about forms and rules as the Income Tax Act, 2025 is put into practice.
