Union Budget 2026 Introduces Major Taxpayer Relief Measures
Union Finance Minister Nirmala Sitharaman on Sunday presented a comprehensive package of taxpayer-friendly initiatives in the FY27 Budget, focusing on simplifying compliance procedures and reducing financial burdens for individuals. The announcements, made during the Budget presentation in Parliament, signal a significant shift toward automation and predictability in India's tax administration system.
Automated System for Lower or Nil Tax Deduction
One of the centerpiece proposals involves a new rule-based automated scheme designed specifically for small taxpayers. This innovative system will allow eligible individuals to obtain lower or nil tax deduction certificates without requiring discretionary approvals from tax officials, marking a departure from traditional manual processes.
"I propose a scheme for small taxpayers wherein a rule-based automated process will enable obtaining a lower or nil deduction certificate instead of filing an application with the assessing officer," Sitharaman stated during her Budget speech.
Expanding on operational details, the Finance Minister added that depositories would be enabled to accept Form 15G or Form 15H directly from investors holding securities in multiple companies, streamlining the documentation process significantly. This move is expected to dramatically reduce compliance burdens for individuals with modest taxable incomes while eliminating delays and inconsistencies associated with manual processing.
Foreign Asset Disclosure Scheme for Targeted Groups
As part of the broader tax simplification package, Sitharaman proposed a six-month foreign asset disclosure scheme specifically targeting small taxpayers including students, technology professionals, and relocated non-resident Indians (NRIs). This initiative provides an opportunity for voluntary compliance, allowing eligible participants to regularize disclosures and obtain nil tax certificates where applicable.
The scheme reflects authorities' dual focus on encouraging transparency while offering proportionate relief to individuals whose overseas assets or income stem from legitimate activities like education, employment, or relocation rather than deliberate tax avoidance strategies.
Sharp Reduction in TCS Rates Under LRS
The Budget proposed substantial reductions in tax collection at source (TCS) rates under the Liberalised Remittance Scheme (LRS), addressing concerns about cash-flow pressures for households making legitimate overseas payments.
- The TCS rate on remittances for education and medical purposes will be reduced from 5 percent to 2 percent
- The TCS rate on overseas tour programs and travel packages will be standardized at 2 percent, down from the existing 5 percent or 20 percent rates
These adjustments align tax policy more closely with essential and consumption-related expenditures, providing meaningful relief to Indian citizens engaging in legitimate international transactions.
Extended Timelines for Revised and Original Returns
In another compliance-focused reform, the Finance Minister announced significant extensions to filing deadlines for income-tax returns. The timeline for revising returns has been extended from December 31st to March 31st, with only a nominal fee required for late revisions.
"I propose to stagger the timeline for filing of tax returns - individuals with ITR 1 and ITR 2 will continue to file till 31st July and non-audit business cases or trust are proposed to be allowed time till 31st August," Sitharaman explained.
This staggered approach aims to reduce system congestion while providing taxpayers, particularly those with simpler income structures, greater flexibility in meeting their filing obligations.
Building on Previous Tax Reforms
The FY27 announcements represent a continuation of relief measures introduced in the previous Budget. Budget 2025-26 had implemented substantial changes to slab rates under the new tax regime, effectively exempting salaried individuals with taxable incomes up to ₹12.75 lakh—after accounting for standard deductions—from paying any income tax.
The current proposals further demonstrate the government's commitment to creating a more responsive, efficient, and taxpayer-friendly fiscal environment, with particular attention to simplifying processes for individuals with modest or complex income profiles.
