Finance Minister Nirmala Sitharaman presented the Union Budget 2026 on February 1, outlining a fiscal roadmap that prioritizes targeted measures over broad-based tax reforms. While the budget did not announce any changes to income tax slabs or further reductions in income tax rates under the new tax regime, it introduced a series of compliance easements and rationalizations aimed at benefiting individual and salaried taxpayers across India.
Key Tax Changes Effective from April 1
Rather than implementing sweeping tax cuts, Budget 2026 focuses on simplifying processes and providing specific reliefs that will ease the financial burden on the middle class and salaried individuals. The measures include extended deadlines for filing revised income tax returns, reduced Tax Collected at Source (TCS) rates on overseas transactions, and tax exemptions on certain compensations.
Extended Deadline for Revised ITR Filing
One of the significant changes in Budget 2026 is the extension of the deadline for filing revised Income Tax Returns (ITRs). Previously, taxpayers could only file revised returns to correct omissions or mistakes by December 31 of the relevant assessment year, as per Section 263(5) of the Income-tax Act, 2025.
From April 1, this deadline has been extended to March 31, providing taxpayers with additional time to rectify errors in their original filings. However, if the revised return is filed after December 31, a nominal fee will be applicable. This move is expected to reduce last-minute rush and errors in tax filings.
Reduced TCS Rates for Overseas Travel
Budget 2026 has also brought relief to Indians planning overseas travel by reducing the Tax Collected at Source (TCS) rate on the sale of overseas tour program packages. The TCS rate has been lowered from the current slabs of 5% and 20% to a uniform rate of 2%, without any stipulation on the amount.
This reduction is anticipated to decrease upfront costs for travelers opting for tour packages, making international travel more accessible and simplifying the financial aspects for tourists. The change aims to boost the tourism sector and provide ease of travel for Indian citizens.
TCS Rationalization for Education and Healthcare
In addition to travel, Budget 2026 has rationalized TCS rates for remittances made under the Liberalised Remittance Scheme (LRS) for education and medical purposes. The TCS rate for these categories has been reduced from 5% to 2%, although the ₹10 lakh threshold remains unchanged.
For other purposes under LRS, such as investments and overseas spending, the TCS rate continues to be 20% on amounts exceeding ₹10 lakh. This targeted reduction is designed to support students and patients seeking services abroad, aligning with the government's focus on education and healthcare.
Tax Exemption on Motor Accident Compensation
During her budget speech, Finance Minister Nirmala Sitharaman proposed a tax exemption on awards given by the Motor Accident Claims Tribunal. This measure aims to alleviate the suffering of accident victims and their families, who often face extreme financial hardship.
The budget document states that income in the nature of interest under the Motor Vehicles Act, 1988, will be exempt from tax for individuals or their legal heirs. This change, effective from April 1, is expected to provide much-needed relief to those affected by motor accidents.
No Interest on Penalty During Appeal Period
Budget 2026 further relaxes compliance norms by stipulating that there will be no interest liability on taxpayers for penalty amounts during the period of appeal before the first appellate authority, regardless of the outcome. This provision is intended to reduce the financial strain on taxpayers involved in disputes and encourage timely resolution of appeals.
Overall, while Budget 2026 refrains from altering income tax slabs, it introduces practical measures that simplify tax compliance and offer targeted reliefs. These changes are poised to benefit salaried and individual taxpayers by easing financial burdens and enhancing procedural efficiency in the tax system.
