Budget 2026 Income Tax Highlights: Changes in taxation on SGB redemption, share buyback, TCS, STT, NRI property TDS, updated income tax slabs, standard deduction and more

Finance Minister Nirmala Sitharaman, in the Union Budget 2026, announced several major reforms despite there being no change in the standard deduction and income tax slabs for the financial year FY 2026–27. Budget 2026 retains the same tax rates and slabs as applicable in the current financial year 2025-26.

However, below are the other key income tax–related highlights that you should know.

1. New Income Tax Act effective from April 1, 2026

As announced in the Budget speech, the new Income Tax Act will come into force from April 1, 2026. The government will shortly notify simplified income tax rules and forms. These forms have been redesigned to ensure that ordinary taxpayers can comply easily, without facing unnecessary complexity.

Also read: Stock buyback will be considered as capital gains with effective rates of 22% and 30%, announces FM in Budget 2026

2. Reduction of TCS rates

Two major changes relating to TCS were announced in Budget 2026:

• TCS on overseas tour packages has been reduced from the existing 5% and 20% to a flat 2%, without any minimum threshold.
• Under the Liberalised Remittance Scheme (LRS), TCS on remittances for education and medical purposes has been reduced from 5% to 2%.

Also read: 7 pains from Budget 2026 that will hit middle-class taxpayers hard, check how

3. Extension of revised ITR filing deadline

The deadline for filing a revised income tax return has been extended from December 31 to March 31, subject to payment of a nominal fee.

4. No change in Income Tax Slabs

In the new tax regime, there is no age-based benefit. The tax slabs are the same whether you are below 60 years old or senior citizen (60 +), or super senior citizen (80 +).

New Income Tax Regime Slab for FY 2026–27

Taxable Income	Tax Rate
Up to Rs 4,00,000	Nil
Rs 4,00,001 – Rs 8,00,000	5%
Rs 8,00,001 – Rs 12,00,000	10%
Rs 12,00,001 – Rs 16,00,000	15%
Rs 16,00,001 – Rs 20,00,000	20%
Rs 20,00,001 – Rs 24,00,000	25%
Above Rs 24,00,000	30%

Rebate under Section 87A makes tax zero up to Rs 12 lakh taxable income and salaried taxpayers also get Rs 75,000 standard deduction.

Old Income Tax Regime Slab for FY 2026-27

Below 60 years

Taxable Income	Tax Rate
Up to Rs 2,50,000	Nil
Rs 2,50,001 – Rs 5,00,000	5%
Rs 5,00,001 – Rs 10,00,000	20%
Above Rs 10,00,000	30%

Age 60 years to below 80 years (Senior citizen)

Taxable Income	Tax Rate
Up to Rs 3,00,000	Nil
Rs 3,00,001 – Rs 5,00,000	5%
Rs 5,00,001 – Rs 10,00,000	20%
Above Rs 10,00,000	30%

Age 80 years and above (Super senior citizen)

Taxable Income	Tax Rate
Up to Rs 5,00,000	Nil
Rs 5,00,001 – Rs 10,00,000	20%
Above Rs 10,00,000	30%

5. PAN-based TDS for NRI property sales

For the sale of immovable property by non-residents, TDS will now be deducted and deposited using the resident buyer’s PAN-based challan, removing the requirement for obtaining a TAN.

Also read: NRI professionals visiting India to get 5-year tax exemption on overseas income: Budget 2026

6. Taxation of Sovereign Gold Bonds (SGBs)

As per the Finance Bill, 2026, tax exemption on redemption of Sovereign Gold Bonds at maturity will continue only for bonds subscribed at the time of original government issuance.
For investors who purchase SGBs from the secondary market, the difference between acquisition price and the redemption value will now be taxable at maturity.

7. Buyback of shares

Share buybacks will now be taxed as capital gains for all shareholders. To prevent tax arbitrage:

• Corporate promoters will face an effective tax of 22%
• Non-corporate promoters will face an effective tax of 30%

8. Customs duty on personal imports

Customs duty on all dutiable goods imported for personal use has been reduced from 20% to 10%.

Also read: New REIT proposal in Budget 2026 to help retail investors generate steady returns with addition of CPSE option

9. Securities transaction tax (STT) on futures & options

• STT on futures increased from 0.02% to 0.05%
• STT on options premium increased from 0.1% to 0.15%
• STT on exercise of options increased from 0.125% to 0.15%

10. Automated process of getting NIL deduction certificate

A new scheme has been proposed for small taxpayers to obtain a lower or NIL deduction certificate through an automated, rule-based process. This will eliminate the existing requirement of filing applications with the Assessing Officer.

11. Interest on motor accident compensation made tax-free

The FM has proposed that interest awarded by the Motor Accident Claims Tribunal to a natural person will be exempt from Income Tax. Consequently, no TDS will be applicable on such interest income.

12. Clarification of TDS provisions for manpower supply services

TDS on the supply of manpower services has been brought within the ambit of payment to contractors for TDS to avoid ambiguity. As a result, TDS on such services will be applicable at 1% or 2%, as relevant.

13. Depositories to accept Form 15G/15H

Investors earning income from multiple units and securities face a cumbersome process, needing to submit separate forms to all entities, thus leading to enhanced compliance.
It is proposed that taxpayers holding securities across multiple companies will be able to enable depositories to accept Form 15G or Form 15H from the investor and provide it directly to various relevant companies. This removes the need for multiple submissions.

14. Individual ITR due dates remain unchanged

There is no change in the ITR filing deadline for individuals filing ITR-1 and ITR-2, which remains July 31. However, non-audit business cases and trusts are proposed to be given time until August 31.

15. Foreign asset disclosure scheme

A six-month one-time foreign asset disclosure scheme has been introduced for small taxpayers such as students, young professionals, tech employees, and relocated NRIs.
The scheme covers two categories:

• Category A: Taxpayers who neither disclosed foreign income nor assets, the limit of undisclosed income/assets is proposed to be up to 1 crore rupees. They need to pay 30% tax on FMV or undisclosed income, plus an additional 30% tax in lieu of penalty, with immunity from prosecution.
• Category B: Taxpayers who disclosed income and paid tax but failed to declare the asset (asset value up to Rs 5 crore). Immunity from penalty and prosecution is available on payment of a Rs 1 lakh fee.

16. Rationalisation of penalty and prosecution

Major reforms include:

• Integration of assessment and penalty proceedings into a single common order
• No interest on penalty amount during appeal before the first appellate authority
• The quantum of pre-payment is being reduced from 20% to 10% and will continue to be calculated only on core tax demand.
• Option to file updated returns even after reassessment proceedings begin, by paying an additional 10% tax
• Conversion of penalties for technical defaults (audit failures, transfer pricing reports, default in furnishing statements for financial transactions) into fees
• Extension of immunity framework from underreporting to misreporting cases, subject to payment of 100% additional tax
• Non-production of books of account and documents, and requirement of TDS payment, where payment is made in kind, are being decriminalised. Further, minor offences will attract fine only.

17. Cryptocurrency reporting penalties

New penalty provisions have been introduced for crypto firms over lapses in transaction disclosures:

• Rs 200 per day for non-furnishing of statements
• Rs 50,000 penalty for furnishing inaccurate particulars or failure to correct errors

18. Tax Holiday for cloud service providers

A tax holiday until 2047 has been proposed for cloud service providers setting up Indian data centres and serving customers locally. This aims to boost domestic digital infrastructure, data localisation, job creation, and technology adoption.

19. Immunity for small undisclosed foreign assets

Immunity from prosecution is provided for non-disclosure of non-immovable foreign assets below Rs 20 lakh, retrospectively effective from October 1, 2024. This encourages voluntary compliance and reduces burden on small taxpayers.