Outlook Business Desk
From April 1, 2026, India will introduce a new direct tax framework replacing the Income Tax Act, 1961 with the Income Tax Act, 2025. Experts say it will simplify compliance, lower disputes and make tax language easier to follow.
Revised law will apply from the 2026–27 tax year and brings structural changes without changing existing income tax slabs. The system will shift to a single tax year, replacing the earlier distinction between financial year and assessment year for better clarity.
Return filing deadlines will vary based on taxpayer type. Individuals filing ITR-1 or ITR-2 must submit by July 31, non-audit business returns by August 31, companies or audited taxpayers by October 31 and special cases must file by November 30.
Taxpayers will have up to 12 months from the tax year-end to submit revised returns, compared to nine months previously. Late filing fees will apply, with smaller penalties for incomes up to ₹5 lakh and higher charges beyond that threshold.
Securities Transaction Tax (STT) on derivatives will be higher. Tax on options sales and exercised options will increase to 0.15%, while futures transactions will rise to 0.05% from 0.02%, aiming to streamline derivative taxation and improve compliance.
Tax Collected at Source under the Liberalised Remittance Scheme (LRS) will reduce to 2% for education and medical remittances above ₹10 lakh. Overseas tour packages will also have a uniform 2% TCS, while other remittances will continue to be taxed at 20%.
Income from share buybacks will be treated as capital gains, with individual promoters taxed at 30% and corporate promoters at 22%. Sovereign Gold Bonds bought in the secondary market will attract capital gains tax, restricting tax benefits to bonds purchased at the original issue.
Interest on Motor Accident Claims Tribunal compensation will be fully tax-exempt with no TDS. Employer transport benefits will no longer be taxable, and TDS on property from non-residents will be simplified through PAN-linked challans.
Tax exemptions for armed forces pensions will now apply only to personnel discharged due to physical disability. Proposed rules may raise education allowance to ₹3,000 per month per child, hostel allowance to ₹9,000 and widen PAN-linked reporting for high-value transactions.