India's Union Budget 2026 Introduces Major Overhaul of Income Tax Framework
India's Union Budget 2026 introduces a comprehensive overhaul of the Income Tax framework, replacing the 1961 law with the Income Tax Act, 2025, effective April 1, 2026. Key reforms include simplified compliance rules, reduced Minimum Alternate Tax to 14%, and new regulations for share buybacks and tax audits, alongside extended deadlines for income tax returns. Additional measures aim to streamline deductions and disclosures, while penalties for technical offences are reduced to facilitate easier litigation.
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The Union Budget 2026 announces the Income Tax Act, 2025, replacing the 1961 law effective 1 April 2026. Key updates include simplified rules, redesigned forms, and automation. Changes involve rationalised TCS rates, staggered ITR filing deadlines, and an extended window for revised returns to boost compliance.
The Minimum Alternate Tax (MAT) will now be a final tax at a reduced rate of 14%, with limited carry-forward of credits. Share buybacks will be taxed as capital gains, and tax audit defaults will incur fixed late fees.
Additional reforms target PF/ESI deductions, SGB taxation, TDS/TCS simplification, and foreign asset disclosures. The filing timeline for ITR-1 and ITR-2 remains 31 July, while non-audit business returns are extended to 31 August.
Taxpayers can revise returns until 31 March, subject to a nominal fee. The budget also reduces penalties and decriminalises technical offences to simplify litigation.
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