New Delhi: Finance Minister Nirmala Sitharaman announced significant income tax reforms in the Budget 2026 on Sunday. The government has declared that taxpayers will no longer be treated as criminals for unintentional tax evasion. This move aims to build a trust-based tax system across the country.
In her budget speech, the Finance Minister said that under the new Income Tax Act effective from April 1, if any discrepancies are found in a person’s income or tax is unknowingly concealed, the offender will face a penalty instead of imprisonment.
Furthermore, individuals with undisclosed foreign assets will be granted a special six-month window to correct their mistakes. They can disclose their assets under a special scheme to avoid legal complications.
The Finance Minister added, “Minor offences will attract only fines. Other charges will be classified according to the severity of the offence. Simple imprisonment will be imposed where necessary, with maximum jail terms reduced to two years. Courts will also have the authority to convert sentences into fines.”
She also mentioned that during the appeal period before the first appellate authority, no interest will be charged on the penalty amount, regardless of the appeal’s outcome. Additionally, the advance tax payment has been reduced from 20 percent to 10 percent, calculated only on the original tax demand.
The Budget also offers relief in filing Income Tax Returns (ITR). Now, taxpayers can easily correct mistakes in their returns within an extended time frame by paying a nominal fee.
Property purchases have been simplified as well. Buyers purchasing property from NRIs will no longer need to undergo the complicated TAN number process, and TDS can be deducted without a TAN.
Moreover, small taxpayers will no longer have to visit officials for nil TDS certificates, as the process will become fully automatic and digital.
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