Union Budget 2026 proves to be a clear shift from headline tax cuts to more structural fine-tuning. The government is now more focused on prioritising compliance ease, predictability and long-term capital formation. Finance Minister Nirmala Sitharaman’s Budget announcements try to balance revenue needs with targeted relief.
For individual taxpayers, the most notable gains come from procedural reforms rather than changes in tax slabs.
The deadline for revising income tax returns has been extended from December 31 to March 31, providing an additional three-month window to correct filings with minimal penalties.
The government has also rationalized penalties and decriminalized minor tax offences, replacing prosecution with monetary fines in low-value cases, an important step toward reducing litigation and compliance anxiety.
Tax Collected at Source (TCS) on foreign education, medical treatment and overseas tour packages has been reduced to a flat 2% from 5%. It directly benefits families with international obligations.
A six-month one-time disclosure window also allows individuals to regularise undisclosed foreign income or assets, targeting students, professionals, and returning NRIs.
From April 1, 2026 onward, organizations will lose the ability to acquire new Minimum Alternate Tax (MAT) credits, while existing credits can only be used through the newly established system.
The scope of certain exemptions, which include disability pension exemptions, has seen a reduction.
For investors, Budget 2026 changes the market framework significantly, rather than offering short-term incentives.
Foreign investment limits in listed equities have been expanded, with the individual cap raised from 5% to 10% and the aggregate limit from 10% to 24%, improving market depth and liquidity.
The taxation of share buybacks has been overhauled again, with proceeds now taxed as capital gains.
The Securities Transaction Tax (STT) on derivatives has been increased, effective from April 2026, which results in higher costs for futures and options traders.
The elimination of interest deductions on income from dividends and mutual funds has created challenges for investors who use leveraged investment strategies.
The zero basic customs duty applying to 17 life-saving drugs and certain medical products benefits consumers, while electronics and digital goods remain subject to full duty charges.
Customs reforms which provide businesses with extended advance ruling validity and ongoing capital goods exemptions currently benefit manufacturing and export operations, although exemptions for ATMs and specific equipment are being phased out.
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The Budget 2026 changes highlight clarity, stability, and rule-based taxation, especially ahead of the New Income-tax Act scheduled for FY27. While immediate tax relief is limited, the emphasis on predictability, lower compliance friction, and long-term capital alignment may prove more valuable.