Budget 2026 Highlights: Nirmala Sitharaman Announces Important Tax Changes

The Finance Minister Nirmala Sitharaman has announced many important changes in the Budget 2026-27. These changes aim at giving major relief to the taxpayers by making the tax system easier.

One of the biggest announcements is the new Income Tax Act, 2025, which will come into effect from April 1, 2026. The government also decided to introduce simpler tax forms to make the filings easier and smoother. Let us know the highlights from Budget 2026.

Key Tax Changes in Budget 2026

Here are the key tax changes announced in Budget 2026-27:

• New Income Tax Act: A new act called the Income Tax Act, 2025, will replace the current Income Tax Act, 1961, starting from April 1, 2026. It will make rules simpler and reduce confusion for taxpayers. The revised forms will be notified soon.
• ITR Filing Deadline Extended: Taxpayers now have extra time to file their Income Tax Returns. The deadline has been extended from December 31 to March 31. Different types of taxpayers will have staggered deadlines.
• Tax- Exemptions: Interest received by individuals from Motor Accident Claims will become tax-free, attracting nil income tax. Also, the TDS on this interest will be removed.
• TCS (Tax Collected at Source): The TCS rate on tour packages and Overseas Travel Package has been reduced to 2%. Earlier, it was 5% or even 20% in some cases. The TCS rate on the Liberalised Remittance Scheme has also been cut from 5% to 2%.
• Property TDS (Tax Deducted at Source): If you buy a property from an NRI, TDS can now be deducted using PAN instead of TAN, which is easier and more convenient for buyers and sellers.
• Manpower Services u/s 194C: Payments for manpower supply services will come under Section 194C of the Income Tax Act, 1961.
• Penalty Immunity: Penalty immunity has been widened to include cases of misreporting income.
• Cooperative Sector Dividends Exempt: Dividends in the cooperative sector may be tax-free, subject to certain specified conditions.

These changes aim at reducing the compliance burden on taxpayers and making and ensuring that filing taxes becomes easier for everyone.