Mumbai, March 16: Significant updates to the income tax system are set to take effect in India starting April 1, 2026. These changes, introduced by the central government in the 2026 budget, aim to simplify tax filing processes but may also increase expenses for taxpayers. Here are the seven key changes you need to know.
1. New Income Tax Act to be Implemented
The outdated Income Tax Act of 1961 will be replaced by the new Income Tax Act of 2025. Fortunately, there will be no changes to the existing tax slabs, which will remain the same. The new act focuses on simplifying language and eliminating legal complexities.
2. Extended Deadlines for Filing ITR
Taxpayers will now have more time to file their Income Tax Returns (ITR). The deadline for ITR-3 and ITR-4 has been extended to August 31, up from July 31. This extension applies to taxpayers without an audit. However, the deadlines for ITR-1 and ITR-2 remain unchanged at July 31, and the tax audit deadline stays at October 31.
3. New Rules for Revised Returns
Taxpayers wishing to amend their filed ITRs will have until March 31 to do so, an extension from the previous December 31 deadline. However, late filers will incur additional fees. The deadline for belated returns remains unchanged.
4. Changes in TCS Rates
The government has revised the Tax Collected at Source (TCS) rates, which will directly impact taxpayers. The TCS on alcohol sales will increase from 1% to 2%. Similarly, the TCS on scrap sales will rise to 2% from 1%. However, the TCS on the sale of tendu leaves will decrease from 5% to 2%.
5. Relief on TCS for Foreign Travel
For those planning international trips, the government has simplified the TCS on foreign travel packages. A uniform rate of 2% will now apply, regardless of the amount sent. Previously, rates were either 5% or 20%. TCS on amounts sent for education and medical purposes abroad has also been reduced to 2%.
6. Increased STT for Stock Market Traders
Traders in the futures and options market will face higher costs as the Securities Transaction Tax (STT) has been increased. The STT on futures will rise from 0.02% to 0.05%, and on options from 0.1% to 0.15%.
7. New Tax on Share Buybacks and Dividends
From April 1, 2026, a new tax will be imposed on amounts received from share buybacks, which will now be subject to capital gains tax. Previously, this income was taxed as deemed dividends. Corporate promoters will pay a tax rate of 22%, while non-corporate promoters will face a 30% rate. Additionally, taxpayers will no longer be able to claim deductions on interest expenses related to loans taken for dividend income, which previously allowed for up to a 20% deduction.
These changes will significantly impact taxpayers across the country. It is essential to stay informed and plan accordingly for the upcoming tax season.
My name is Ganpat Singh Choughan. I am an experienced content writer with 7 years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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