Finance Minister Nirmala Sitharaman has unveiled a sweeping reset of India’s tax compliance framework, cutting upfront cash outgo for taxpayers and easing procedural burdens ahead of the rollout of the new Income Tax Act from April 1, 2026.
The Budget lowers the pre-deposit required for a stay on disputed tax demand to 10 percent from 20 percent, slashes tax collection at source (TCS) on foreign spending, extends filing and revision timelines, and opens a one-time disclosure window for foreign assets.
“These measures are aimed at reducing compliance friction, improving cash flows and giving taxpayers greater flexibility to correct errors before the new law comes into force,” the government said.
New Income Tax Act
At the centre of the announcements is the new Income Tax Act, set to take effect on April 1, 2026, which the government says will modernise and simplify the tax regime. To smooth the transition, return filing timelines will be staggered.
Individuals filing ITR-1 and ITR-2 will continue to have a July 31 deadline, while non-audit business cases and trusts will get time until August 31.
The deadline for filing revised returns will be extended to March 31 of the assessment year, subject to a nominal fee, giving taxpayers more time to rectify mistakes.
TCS Reduction
One of the biggest takeaways for consumers is the sharp reduction in TCS on overseas tour packages. The rate has been cut to a flat 2 percent with no threshold, replacing the earlier 5 percent and 20 percent slabs.
TCS on remittances for education and medical purposes under the Liberalised Remittance Scheme (LRS) has also been reduced from 5 percent to 2 percent.
“Procedural compliance for small taxpayers takes centre stage in this Budget,” said Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co., citing lower TCS rates, automated low- and nil-withholding certificates, expanded disclosure options and extended timelines.
Tax Exemption for Accident Compensation Interest
In a long-awaited relief, interest awarded by the Motor Accident Claims Tribunal (MACT) to natural persons will now be fully exempt from tax, with no tax deduction at source, ending years of uncertainty.
Easier TDS and Post-Assessment Updates
To prevent unnecessary TDS for small investors, CDSL and NSDL will now accept Form 15G and 15H and share them directly with companies.
Taxpayers will also be allowed to file updated returns even after assessment proceedings begin, subject to payment of an additional 10 percent tax.
One-Time Foreign Asset Disclosure Window
The Budget introduces a six-month, one-time disclosure scheme for foreign assets aimed at students, NRIs and small taxpayers.
Under Category A, undisclosed foreign assets up to ₹1 crore can be regularised by paying a total tax and penalty of 60 percent. Category B allows disclosure of previously reported income but unreported assets up to ₹5 crore for a fee of ₹1 lakh. Both categories offer immunity from prosecution and penalties.
Faster Dispute Resolution, Lower Cash Strain
To speed up tax disputes, assessment and penalty proceedings will be integrated. The pre-deposit required for a stay on tax demand during appeals will be reduced to 10 percent from 20 percent, easing cash-flow pressure on taxpayers.
The Budget also decriminalises select minor offences, including non-production of books, replacing them with monetary penalties.
Also Read: Stress Of IT Investigation Linked To Confident Group Chairman C J Roy’s Suicide https://www.vibesofindia.com/stress-of-it-investigation-linked-to-confident-group-chairman-c-j-roys-suicide/
