Budget 2026: Simplifying Tax Law

Union Budget 2026 places emphasis on simplifying compliance and easing practical challenges. The income tax slabs remain unchanged under both the tax regimes, a move that underscores fiscal discipline and revenue stability.

Finance Minister Nirmala Sitharaman announced that Income-tax Act, 2025 will become effective from April 1, 2026. While the underlying framework remains familiar, the new law focuses on simplified language and redesigned tax forms. Simplified income tax rules and forms will be notified shortly, and sufficient time will be provided to taxpayers to understand the requirements, she said.

One of the long-awaited amendments is the extension of the revised return filing timeline from December 31 to March 31, subject to payment of fees. The current timeline often restricts ability to claim legitimate foreign tax credit due to mismatch with international calendars. This will allow taxpayers to accurately report foreign income and claim double taxation relief.

The due date for filing income tax return (ITR) has also been extended from July 31 to August 31 for non-audit business/professional taxpayers and partners of non-audit firms to provide them more time to prepare books of accounts.

The Budget has also reduced the compliance burden for resident buyers buying immovable property from non-residents.

The tax deduction at source (TDS) on such transactions is proposed to be deposited through a Permanent Account Number (PAN)-based challan, eliminating the requirement to obtain a Tax Deduction and Collection Account Number (TAN). This will make compliance more practical for one-time or occasional transactions. The amendment will take effect from October 1, 2026.

There has been a rationalisation of tax collection at source (TCS) rates, where, remittance for purchase of overseas tour program packages will now attract a flat TCS of 2 per cent compared to 5/20 per cent previously. TCS on education and medical remittance made under the Liberalised Remittance Scheme (LRS) has been reduced from 5 per cent to 2 per cent. This amendment will take effect from April 1, 2026.

Small taxpayers and young professionals may hold overseas assets but may inadvertently fail to disclose them (employee stock options or ESOPs or restricted stock units or RSUs or dormant or low-value foreign bank accounts).

Recognising this, the finance minister has proposed a time-bound scheme for declaring such foreign assets and foreign-sourced income and regularise past omissions without subjecting them to disproportionate penalties.

The proposals introduced in Budget 2026 for individuals rationalise various provisions across the tax framework. Coupled with the implementation of the Income-tax Act, 2025, they are expected to simplify tax laws and enhance overall ease of compliance for taxpayers.

By Poorva Prakash Partner, Deloitte India