01/02/2026
Union Budget 2026 Highlights: Key Announcements by FM Nirmala Sitharaman
• Kartavya Bhavan: Union Budget 2026 is the first-ever Budget prepared at Kartavya Bhavan, FM Nirmala Sitharaman announces.
• Corporate Mitras: New Professional Opportunity
ICAI, ICSI, and ICMAI will introduce modular courses to create "Corporate Mitras" to support MSMEs in Tier-2 and Tier-3 cities.
Purpose: Provide professional assistance in statutory and regulatory compliance, GST, income-tax matters, governance, documentation, and business advisory.
• New Income Tax Act: The new act will come into effect from April 1, 2026, with simpler income tax forms to be notified shortly.
• TDS on Property: TDS on property purchased from NRI can now be deducted under PAN-based instead of TAN.
• TCS Limit: TCS limit on tour packages reduced from 5%/20% to 2% without any limit.
• ITR Filing: Time limit to file ITR increased from December 31 to March 31, with staggered timelines for different types of taxpayers.
• Exemptions: Interest awarded by Motor Accident Claims Tribunal to natural persons will be exempt from income tax, and TDS on the same will be done away with.
• Supply of Manpower Services to be brought under Section 194C of the Income Tax Act 1961.
• Immunity from Penalty now includes Misreporting of Income provisions.
• Dividend exempted to co-op sector on fulfilling specified conditions.
• Amendment in TCS Provisions: TCS on Liberalised Remittance Scheme reduced from 5% to 2%, and TCS on Overseas Travel Package reduced from 5% to 2%.
• New Due Dates for filing of Income Tax Returns:
ITR 1 & 2: July 31
Non-audit business & trust: August 31
• Tax holiday until 2047 for foreign companies providing cloud services globally using data centre services from India.
• MAT exemption to non-residents who pay tax under presumptive schemes.
• Increase in STT rates on Futures & Options.
• Compliance & Returns:
Forms under the new Income Tax Act will be released soon.
One-time, six-month scheme for small taxpayers (including students and NRIs) to disclose foreign assets with immunity.
Safe harbour application validity extended to 5 years.
Deadline to revise tax returns extended to March 31st with a nominal fee.
• Rationalisation of the definition of “accountant” for safe harbour rules.
• Supply Of Cattle Feed And Cotton Seed Produced By A Primary Cooperative Society Allowed For Deduction
• Inter-Cooperative Society Dividend Income Allowed As Deduction Under The New Taxation Regime
• Increase in duty-free goods limit for specified inputs, leather, synthetic footwear.
• Key proposals include a 6-month foreign asset disclosure scheme with penalty-free declaration of income & assets below a threshold, reduction in TCS rate for education & medical purposes under LRS from 5% to 2%, revised return filing with nominal fee between Dec 31 - Mar 31, rationalized filing deadlines for ITR-1 & ITR-2 by July 31 & other non-audit returns by Aug 31. Misreporting of income will attract 100% penalty on tax amount.
• Audit Fee instead of Penalty: The Finance Minister proposed replacing penalties for failure to get accounts audited with a fee, reflecting a shift towards a more facilitative and non-punitive compliance framework.
• 10-year Tax Holiday for Global Cloud Services: Foreign companies providing global cloud services using data centre infrastructure in India will be eligible for a 10-year tax holiday, aiming to attract global cloud players and boost data centre investments.
• BCD Exemption on Solar Glass Raw Materials: No Basic Customs Duty (BCD) will be levied on the import of raw materials used for manufacturing solar glass, reducing input costs and supporting domestic solar manufacturing.
• Tax Relief on Share Buybacks: The taxation of share buybacks is set to change, providing relief to small shareholders and ensuring fairer tax treatment for retail investors participating in buyback offers.
• Simplification of Compliance: The requirement to maintain separate accounts based on the Income Computation and Disclosure Standards (ICDS) will be dispensed with from tax year 2027-28, simplifying compliance and reducing accounting burden on taxpayers.
• BCD Exemption for Defence Sector Aircraft: A Basic Customs Duty (BCD) exemption has been proposed on imports used for the manufacture, maintenance, and repair of aircraft in the defence sector, supporting indigenous defence capabilities and strengthening the domestic aerospace ecosystem.
