India's Union Finance Minister Presents Youth-Focused Budget 2026-27
On February 1, 2026, Union Finance Minister Nirmala Sitharaman unveiled the Budget for the fiscal year 2026-27, marking her ninth consecutive presentation. Termed a unique Yuva Shakti-driven Budget, it prioritizes youth empowerment and administrative simplification over sweeping tax cuts, reinforcing continuity from the previous year. Against a backdrop of significant tax changes in recent times, the Budget aims to promote ease of compliance for ordinary taxpayers, with selective relief measures tailored to streamline processes.
Stability in Income Tax Slabs and Rates
The Honourable Finance Minister has opted for stability, retaining the income tax slabs and rates unchanged from FY 2025-26. This means salaried individuals will continue to pay no tax on income up to approximately INR 12 lakhs, factoring in the standard deduction of INR 75,000 and applicable rebates. This move ensures predictability for taxpayers amid ongoing economic adjustments.
Introduction of the New Income Tax Act 2025
In a landmark shift, the new Income Tax Act 2025, which replaces the longstanding Act of 1961, will take effect from April 1, 2026. Drafted with a focus on simplification, the Act reduces jargon and uses layman language to enhance comprehension. Related Income Tax Rules and Forms are expected to be notified soon, providing taxpayers ample time to familiarize themselves. Early release of electronic versions is crucial to ensure a smooth tax filing experience for all.
Extended Deadlines for Tax Filing and Revisions
To ease compliance burdens, the Budget introduces staggered timelines for filing tax returns. Non-audit business cases now have an extended deadline of August 31, while individual taxpayers filing ITR1 and ITR2 will continue with the July 31 deadline. This extension offers breathing space for finalizing books of accounts and gathering business income details.
Additionally, revised income tax returns can now be submitted until March 31, extending the previous December 31 cutoff. With a nominal fee of INR 1,000 for incomes below INR 5 lakhs and INR 5,000 for higher incomes, this reform provides greater flexibility, especially for globally mobile taxpayers dealing with foreign income and assets. It also facilitates tax treaty relief in cases of double taxation.
Updated Tax Returns and Amnesty Scheme
To encourage voluntary compliance and reduce litigation, taxpayers can file updated returns even after reassessment proceedings begin, subject to an additional 10% tax payment. Updated returns are also permitted where there is a reduction in claimed losses.
For small taxpayers, a six-month tax amnesty scheme has been introduced to simplify reporting of undisclosed foreign assets and income. Targeted at students, young professionals, tech employees, and relocated NRIs, it allows disclosure with a fee of INR 1 lakh for assets up to INR 5 crores from identified sources. For unsubstantiated sources, assets up to INR 1 crore can be disclosed at 60% of fair market value, with no further penalties.
Simplified TDS and TCS Processes
Budget 2026 rationalizes Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions to reduce burdens. TCS on foreign tour packages is reduced to 2%, and on remittances for education and medical treatment abroad under the Liberalised Remittance Scheme (LRS) from 5% to 2%. For property sales by Non-Residents, resident buyers can now deduct TDS using a PAN-based challan instead of a TAN, simplifying transactions and improving fund accessibility.
Lower Withholding Certificate and Prosecution Rationalization
Investors holding securities in multiple companies will benefit from depositories accepting Form 15G/15H directly, eliminating the hassle of tracking multiple submissions. The Budget also proposes a major overhaul of criminal prosecution provisions, merging assessment and penalty proceedings into a single order. Interest liability on penalties during initial appeals is removed, and deposit requirements for tax demands under appeal are lowered from 20% to 10%.
Exemption for Non-Residents and Conclusion
To attract foreign experts, non-resident individuals rendering services in India under a notified scheme will be exempt from income earned outside India for five consecutive tax years, provided they were non-resident in India for the preceding five years. This measure aims to make India an attractive destination for specialized talent.
Overall, Budget 2026-27 consolidates tax reforms with a focus on procedural simplification under the New Income-tax Act, 2025. While it missed opportunities for greater simplification in areas like capital gains, the emphasis on youth-driven initiatives and compliance ease sets a progressive tone for the fiscal year ahead.
