Signalling continuity after last year’s sweeping overhaul of the tax regime, finance minister (FM) Nirmala Sitharaman on Sunday left personal income-tax (I-T) rates and slabs unchanged in the Union Budget 2026–27. Instead of altering rates, the government has chosen to focus on simplifying compliance, easing filing timelines and reducing friction for individual taxpayers, particularly salaried employees, small taxpayers and non-resident Indians (NRIs).
Presenting the Budget in Parliament, Ms Sitharaman says the government’s approach to direct taxes is guided by the principles of ease of living and ease of doing business, with a clear emphasis on reducing litigation, rationalising tax deduction mechanisms and using automation to limit taxpayer interaction with assessing officers.
No Slab Changes after Last Year’s Reforms
After major structural reforms to income-tax in the previous Budget, the finance minister refrained from tinkering with slabs or rates this year. The decision is expected to provide predictability to taxpayers and avoid mid-course corrections at a time when the government is prioritising fiscal consolidation and stable revenue flows.
Last year, under the new tax regime, the FM revised tax slabs. As per the revised seven tax slabs, there is no tax for income of up to Rs4 lakh. For income of up to Rs12 lakh, there is no tax. The limit for salaried taxpayers is Rs12.75 lakh with a standard deduction of Rs75,000. At present, for income between Rs4 lakh and Rs8 lakh, the new tax rate is 5%. For Rs8 lakh to Rs12 lakh, it is 10%. Income between Rs12 lakh and Rs16 lakh is taxed at 15%. For incomes of Rs16 lakh to Rs20 lakh, the tax is 20%, and for incomes between Rs20 lakh and Rs24 lakh, the tax is 25%. Incomes above Rs24 lakh continue to be charged 30%.
Instead of tweaking tax slabs, Budget 2026–27 introduces a series of procedural and compliance-related measures that directly affect how individuals file returns, claim deductions and deal with tax authorities.
More Time To Revise Returns
One of the most significant taxpayer-friendly changes is the extension of the timeline for revising income tax returns. FM Sitharaman proposed allowing taxpayers to revise their returns up to 31st March, instead of the earlier 31st December deadline, subject to payment of a nominal fee.
This move is expected to benefit salaried individuals, professionals and first-time filers who often discover reporting errors or missing disclosures late in the financial year.
The finance minister also announced staggered deadlines for filing returns, aimed at easing pressure on taxpayers and the tax administration. Individuals filing income-tax returns (ITR)-1 and ITR-2 will continue to have 31st July as the due date, while non-audit business cases and trusts will be allowed time until 31st August.
Relief for Accident Victims
In a major relief for accident victims and their families, Ms Sitharaman announced that interest awarded by the motor accident claims tribunal (MACT) to individuals will be fully exempt from income tax. The government will also do away with tax deduction at source (TDS) on such interest.
The move addresses long-standing complaints that victims are being subjected to tax deductions on compensation-related interest, often at times of financial distress.
Lower TCS on Foreign Spending
The Budget also delivers relief to individuals making overseas payments. Ms Sitharaman proposed a sharp reduction in tax collection at source (TCS) on several categories of foreign expenditure.
The TCS rate on overseas tour programme packages will be reduced to 2%, down from the earlier rates of 5% and 20%, with no minimum threshold. Similarly, TCS on remittances for education and medical purposes under the liberalised remittance scheme (LRS) will also be cut from 5% to 2%.
These changes are likely to benefit students studying abroad, families incurring overseas medical expenses and middle-class households booking foreign travel.
Automation To Ease Small Taxpayer Compliance
To reduce procedural hurdles for small taxpayers, the finance minister announced a rule-based automated system that will allow individuals to obtain a lower or nil deduction certificate without filing an application before an assessing officer.
The proposal is aimed at eliminating discretionary processes and cutting down delays that often affect taxpayers with legitimate claims for lower TDS.
In another important simplification, taxpayers holding securities in multiple companies will now be able to submit form 15G or form 15H directly to depositories who will then forward the declaration to all relevant companies. This replaces the current requirement of submitting separate forms to each dividend-paying entity.
Changes Affecting NRIs and Cross-border Transactions
For non-resident Indians (NRIs), the Budget proposes I-T exemption for a period of five years for NRIs providing capital goods to Indian companies, a move aimed at encouraging technology transfer and investment.
Additionally, in cases where immovable property is sold by a non-resident, TDS will now be deducted and deposited using the resident buyer’s permanent account number (PAN) instead of requiring a TAN (tax deduction and collection account number), reducing procedural complexity for individual buyers.
The finance minister also announced a one-time, six-month foreign asset disclosure scheme for small taxpayers to voluntarily disclose overseas income or assets below a specified threshold, offering immunity from prosecution on compliance.
Penalty and Litigation Reforms
In a major shift towards reducing tax litigation, Ms Sitharaman proposed integrating assessment and penalty proceedings into a single common order, cutting down multiple layers of disputes.
Procedural defaults will increasingly attract fees instead of penalties and the framework for immunity from penalty and prosecution in cases of underreporting will now be extended to misreporting, subject to payment of additional income tax.
Certain offences, including non-production of books of account and specific TDS-related defaults, will be decriminalised, while honest taxpayers willing to settle disputes will be allowed to close cases by paying an additional amount in lieu of penalty.
Higher STT on Derivatives
On the securities front, the finance minister proposed raising the securities transaction tax (STT) on futures from 0.02% to 0.05% and on options from 0.15% to 0.25%. While this does not directly affect income tax filing, it increases transaction costs for retail investors active in derivatives trading.
However, it’s impossible under the civilian leadership in the current era.
As regards senior citizens concessions,
they are being denied without sufficient reasons and quite unlike the rest of the developed world.
Bhagwan hi malik hai ab.
The public feels it’s armtwisting for unjustified advance taxation.
And the inaction/inability of the government to trace non filers.