New Income Tax Act - Simplified Income Tax Rules: Budget 2026-2027 Highlights » Central Government Staff Rules, Circulars and Orders

New Income tax Act ,2025 to come into effect from April 2026
The simplified Income Tax Rules and Forms will be notified shortly. The forms redesigned for easy compliance of ordinary citizens.

Interest awarded by the Motor Accident Claims Tribunal to a natural person will be exempt from Income Tax, and any TDS on this account will be done away with.
TCS Rationalization
Reduce TCS rate on sale of overseas tour program package to 2 % (from current 2-20%).
Reduce the TCS rate to 2% (from current 5%) for LRS remittances for education and medical.
Simplified TDS provisions for manpower supply will benefit labour intensive business.
Scheme for small taxpayers wherein a rule based automated process for obtaining Lower or nil deduction certificate instead of filing application with the assessor.
Single window filing with depositories for Form 15G or 15 H for TDS on dividends, interests etc
Extend time available for revising returns from 31st December to upto 31st March with payment of nominal fees
The timeline for filing of tax returns to be staggered .
TAN for property transactions involving NRIs will be replaced with resident buyers PAN based challan.
A one time 6 month foreign asset disclosure scheme for small taxpayers to disclose their overseas Income or asset.

IT assessment & penalty proceedings are proposed to be integrated by way of common order for both.
Taxpayers allowed to update their returns even after reassessment proceedings have been initiated to reduce litigations, at an additional 10 percent tax rate over and above the rate applicable for the relevant year.
Penalty for misreporting of income also eligible for immunity with payment of additional income tax.
Prosecution framework under the Income Tax Act to be rationalized.
Non-production of books of account and documents, and requirement of TDS payment, where payment 1s made in kind, to be decriminalised.
Non-disclosure of non-immovable foreign assets with aggregate value less than 20 lakh rupees to be provided with immunity from prosecution with retrospective effect from 1.10.2024.

Extend deduction already allowed to a primary cooperative society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to those supplying cattle feed and cotton seed also.
Allow the inter-cooperative society dividend income as deduction under the new tax regime to the extent it 1s further distributed to 1ts members.
Exemption for a period of 3 years allowed to dividend income received by a notified national cooperative federation, on their investments made in companies up to 31.1.2026, for dividends further distributed to its member co-operatives.

Software development services, IT enabled services, knowledge process outsourcing services and contract R&D services relating to software development to be clubbed under a single category of Information Technology Services with a common safe harbour margin of 15.5 percent.
The threshold for availing safe harbour for IT services to be enhanced from 300 crore rupees to 2,000 crore rupees.
Safe harbour for IT services shall be approved by an automated rule-driven process, can be continued for a period of 5 years at a stretch.
Unilateral Advanced Pricing Agreement (APA) process for IT services to be fast-tracked with the endeavour to conclude it within a period of 2 years, which can be extended by 6 months on taxpayer’s request.
The facility of modified returns available to the entity entering APA to be extended to its associated entities.

Any foreign company that provides cloud services to customers globally by using data centre services from India to be provided Tax holiday till 2047
A safe harbour of 15 percent on cost to be provided if the company providing data centre services from India 1s a related entity.
A safe harbour to non-residents for component warehousing in a bonded warehouse at a profit margin of 2 percent of the invoice value. The resultant tax of about 0.7 percent will be much lower than in competing jurisdictions.
Exemption from income tax for 5 years to be provided to any non-resident who provides capital goods, equipment or tooling, to any toll manufacturer in a bonded zone.
Exemption to global (non-India sourced) income of a non-resident expert, for a stay period of 5 years under notified schemes
Exemption from Minimum Alternate Tax (MAT) to all non-residents who pay tax on presumptive basis.

A Joint Committee of Ministry of Corporate Affairs and Central Board of Direct Taxes to be constituted for incorporating the requirements of Income Computation and Disclosure Standards (ICDS) in the Indian Accounting Standards (IndAS) itself. Separate accounting requirement based on ICDS will be done away with from the tax year 2027-28.
Definition of accountant for the purposes of Safe Harbour Rules to be rationalized.

In the interest of minority shareholders, buyback for all types of shareholders to be taxed as Capital Gains. Promoters to pay an additional buyback tax, making effective tax 22 percent for corporate promoters and 30 percent for non-corporate promoters.
TCS rate for sellers of specific goods namely alcoholic liquor, scrap and minerals will be rationalized to 2 percent and that on tendu leaves will be reduced from 5 percent to 2 percent.
STT on Futures to be raised to 0.05 percent from present 0.02 percent. STT on options premium and exercise of options to be raised to 0.15 percent from the present rate of 0.1 percent and 0.125 percent respectively.
To encourage companies to shift to the new regime, set-off of brought forward MAT credit to be allowed to companies only 1n the new regime. Set-off using available MAT credit to be allowed to an extent of 1/4th of the tax liability in the new regime.
MAT is proposed to be made final tax. There will be no further credit accumulation from 1st April 2026. The rate of final tax to be reduced to 14 percent from the current MAT rate of 15 percent. The brought forward MAT credit of taxpayers accumulated till 31st March 2026, will continue to be available to them for set-off as above.

New Income Tax Act – Simplified Income Tax Rules: Budget 2026-2027 Highlights