New Delhi, March 13, 2026 — Major tax reforms announced in the Union Budget 2026 by Finance Minister Nirmala Sitharaman will kick in from April 1, 2026 (FY 2026-27), marking the biggest overhaul of India’s direct tax framework in over six decades. The centrepiece is the Income Tax Act, 2025, which fully replaces the 1961 law with simpler language, fewer redundant provisions, and reduced litigation potential. Income tax slabs remain unchanged, but compliance rules, filing deadlines, transaction taxes, and treatment of dividends and buybacks have been reworked.
Here are the 7 major changes that will affect individual taxpayers, F&O traders, investors, and businesses:
# 1. New Income Tax Act, 2025 Comes into Force
The 1961 Act is replaced entirely from April 1, 2026. The new law uses plain language, removes obsolete sections, and introduces the term “Tax Year” (replacing Financial Year and Assessment Year) for easier understanding. No changes to tax slabs or the ₹12 lakh rebate under the new regime. Goal: fewer disputes and digital-era compliance.
# 2. Extended ITR Filing Deadlines for Non-Audit Cases
- ITR-1 & ITR-2: Deadline stays July 31.
- ITR-3 & ITR-4 (non-audit taxpayers, professionals, small businesses): Extended to August 31 (from July 31).
- Tax audit deadline remains October 31.
This gives extra breathing room for reconciliation of books. The extension also applies retrospectively for FY 2025-26.
# 3. Revised ITR Deadline Extended to March 31 (with late fee)
Taxpayers can now file revised returns until March 31 of the assessment year (previously December 31). However, filing after December 31 will attract an additional fee. Belated return deadlines remain unchanged.
# 4. Securities Transaction Tax (STT) Hike on Derivatives
To curb excessive speculation in the F&O segment:
- Futures: STT rises from 0.02% to 0.05% (150% increase).
- Options (premium & exercise): STT rises from 0.1% / 0.125% to 0.15%.
Equity delivery and mutual fund STT rates are unchanged. Traders will see higher transaction costs starting April 1.
# 5. Rationalised TCS Rates (Simplification + Some Hikes)
Several TCS rates are streamlined from April 2026:
- Overseas tour packages under LRS: Flat 2% (earlier 5%/20%).
- Education & medical remittances under LRS: Reduced to 2% (from 5%).
- Alcoholic liquor, scrap, minerals (coal, lignite, iron ore): Hiked to 2% (from 1%).
- Tendu leaves: Reduced to 2% (from 5%).
Aim: fewer refund issues and less confusion for buyers and sellers.
# 6. Share Buyback Proceeds Taxed as Capital Gains
Buyback amounts will be treated as capital gains (instead of deemed dividend taxed at slab rates). Promoter shareholders face a differential tax: 22% (corporate) or 30% (non-corporate). This shifts the tax burden and changes planning for listed companies.
# 7. No More Interest Expense Deduction on Dividend Income + One-Time Foreign Asset Disclosure Window
- Interest paid to earn dividends or mutual fund income can no longer be deducted (earlier allowed up to ₹20,000 limit). Dividend income will now be fully taxable at slab rates.
- A six-month one-time voluntary disclosure scheme for undisclosed foreign assets has been opened with reduced penalties to boost compliance and transparency.
# What This Means for You
- Salaried & small taxpayers: Mostly unchanged slabs + extra filing time for revised returns.
- F&O traders: Higher costs — expect reduced high-frequency trading.
- Investors & businesses: Simpler TCS, new buyback rules, and stricter dividend taxation.
- NRIs & global Indians: Easier LRS remittances and a chance to declare overseas assets.
The government says these steps will reduce litigation, speed up refunds, and modernise the tax system. New ITR forms and draft rules under the Income Tax Act, 2025 are expected soon. Taxpayers are advised to consult professionals and update their financial planning before the new regime fully kicks in on April 1.
Stay tuned for CBDT notifications on updated forms and procedures.
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