Renumbering of Income Tax Forms as per ITA 2025 and Income-tax Rules, 2026

Income-tax Forms Revamped under ITA 2025 & Draft Income-tax Rules, 2026

The Government has initiated one of the most significant compliance overhauls in the history of Indian direct taxation with the introduction of the Income-tax Act, 2025 and the Draft Income-tax Rules, 2026.

A major component of this reform is the comprehensive restructuring, simplification, and renumbering of Income-tax Forms.

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This article covers:

  • The reason behind the change in forms

  • Key forms that have been renumbered

  • The impact on taxpayers and professionals

  • What lies ahead

Background of the Reform

The proposed Income-tax Act, 2025, expected to come into force from 1 April 2026, seeks to:

  • Simplify drafting and terminology

  • Minimise litigation

  • Eliminate redundant provisions

  • Strengthen technology-based compliance

To align with the new legislation, the Government has released the Draft Income-tax Rules, 2026 for public consultation.

Extent of Rationalisation

Particulars Old Rules (1962) Draft Rules (2026)
Number of Rules 511 333
Number of Forms 399 190

The reduction has been achieved through consolidation, elimination of repetitive disclosures, and standardisation of reporting requirements.

1️⃣ Audit & Reporting Forms – Fully Reorganised

Audit and reporting formats have been merged and logically restructured.

Earlier Form Purpose New Form
3CA / 3CB / 3CD Tax Audit Report Form 26 (55 segmented clauses)
3CEB Transfer Pricing Audit Form 48
29B MAT Audit Report Form 66
10FA Tax Residency Certificate Form 42
10F DTAA Details (u/s 90 / 90A) Form 41

🔎 Key Change:
Multiple audit formats are consolidated into structured, segment-wise forms, reducing duplication and interpretational issues.

2️⃣ Charitable Trusts & NGOs – Streamlined Compliance

Compliance requirements for trusts and NGOs, previously considered complex, have been simplified and renumbered.

Earlier Form Purpose New Form
10A Provisional Registration Form 104
10AB Registration / Renewal Form 105
Form 10 Accumulation of Income Form 109
10B / 10BB Audit Report Form 112
10BD Donee Statement Form 113
10BE Donor Certificate Form 114

🔎 Key Change:
Distinct segregation between registration, audit, accumulation, and donation reporting reduces the risk of technical rejections.

3️⃣ TDS / TCS Compliance – Rationalised & Standardised

TDS/TCS forms have been logically renumbered and aligned for improved automation.

Earlier Form Purpose New Form
Form 13 Lower / NIL TDS Application Form 128
Form 16 Salary TDS Certificate Form 130
24Q TDS Return – Salary Form 138
26Q TDS Return – Residents Form 140
27Q TDS Return – Non-Residents Form 144
27EQ TCS Return Form 143

🔎 Key Change:
Enhanced design supports automated validation, reconciliation, and centralised processing — reducing mismatches and notices.

4️⃣ Other Significant Renumbered Forms

Several widely used compliance forms have also been reassigned:

Earlier Form Purpose New Form
Form 26AS Annual Tax Statement Form 168
15CA Foreign Remittance Form 145
15CB CA Certificate for Remittance Form 146
61A SFT Reporting Form 165

5️⃣ Philosophy Behind the New Structure

The new Rules and Forms reflect the same guiding principles as the Income-tax Act, 2025:

✔ Simpler Drafting

Clear and accessible language to avoid ambiguity.

✔ Uniform Data Fields

Standardised disclosures across forms to prevent repetitive reporting.

✔ Intelligent Forms

Designed with:

  • Pre-filled information

  • Built-in validations

  • Automated reconciliation

✔ Technology-Led Administration

Facilitates:

  • Centralised processing

  • Data analytics

  • Improved taxpayer services

6️⃣ Public Consultation & Participative Reform

The Draft Rules and Forms were placed in the public domain for 15 days (up to 22 February 2026).

Two comparative navigators have been provided:

  • Old Rules vs New Rules Mapping

  • Old Forms vs New Forms Mapping

Stakeholders can submit feedback rule-wise and form-wise, ensuring transparency and participative policymaking.

7️⃣ Implications for Stakeholders

For Taxpayers

  • Fewer forms to interpret

  • Reduced repetitive disclosures

  • More intuitive filing experience

For Professionals

  • Short-term adjustment phase

  • Long-term efficiency gains

  • Lower litigation and compliance risks

For the Tax Administration

  • Cleaner and structured data

  • Improved analytics

  • More predictable compliance environment

Conclusion

The restructuring and renumbering of Income-tax Forms under the Income-tax Act, 2025 and Draft Income-tax Rules, 2026 goes far beyond mere renaming.

It marks a structural shift toward a simplified, digitised, and taxpayer-centric compliance framework, laying the foundation for a modern and technology-driven direct tax regime in India.

Budget 2026 Income Tax Slab Rates for FY 2026-27 | AY 2027-28

Income Tax Rates as per Budget 2026 – FY 2026-27 (AY 2027-28)

No Change in Old Tax Regime Slab Rates

Union Budget 2026 has not made any changes to the income tax slab rates under the normal (old) tax regime. The slab structure applicable for FY 2026-27 continues to remain identical to FY 2025-26 for individuals, HUFs, companies, firms, and other assessees.

However, the new tax regime under Section 115BAC continues to apply with the revised slab rates introduced earlier, along with an enhanced rebate under Section 87A, making it the default regime for individuals.

1. Income Tax Rates – Individuals, HUF, AOP, BOI & AJP

(Old / Normal Tax Regime)

1.1 Individuals (Below 60 Years)

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

✔ Rates unchanged for AY 2026-27 and AY 2025-26

1.2 Resident Senior Citizens (60–79 Years)

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

1.3 Resident Super Senior Citizens (80 Years & Above)

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

1.4 HUF / AOP / BOI / Artificial Juridical Person

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

2. Surcharge – Individuals, HUF, AOP & BOI

Total Income Surcharge
₹50 lakh – ₹1 crore 10%
₹1 crore – ₹2 crore 15%
₹2 crore – ₹5 crore 25%
Above ₹5 crore 37%

Important Clarifications

  • Higher surcharge not applicable on:

    • Dividend income

    • Capital gains under Sections 111A, 112, 112A & 115AD

  • Surcharge on such income capped at 15%

  • Marginal relief available at each surcharge slab

3. Health & Education Cess

  • Levied at 4% on income tax plus surcharge

  • Not applicable to specified funds under Section 10(4D) (in notified cases)

4. Rebate under Section 87A – Old Regime

  • Available to resident individuals

  • Total income up to ₹5,00,000

  • Maximum rebate: ₹12,500

  • Result: Nil tax liability

5. Alternate Minimum Tax (AMT)

  • Applicable where regular tax is less than 18.5% of adjusted total income

  • AMT rate for IFSC units earning foreign exchange income: 9%

6. New Tax Regime – Section 115BAC

(Default from AY 2024-25)

6.1 Slab Rates – AY 2026-27

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

6.2 Section 87A Rebate – New Regime

  • Available up to ₹12,00,000 income

  • Maximum rebate: ₹60,000

  • Marginal relief available

  • AMT not applicable under the new regime

7. Partnership Firms & LLPs

  • Flat tax rate: 30%

  • Surcharge: 12% if income exceeds ₹1 crore

  • Cess: 4%

  • AMT: 18.5% (9% for IFSC units)

8. Local Authorities

  • Tax rate: 30%

  • Surcharge, cess, and AMT same as partnership firms

9. Domestic Companies – Tax Rates

Category Tax Rate
Turnover ≤ ₹400 crore (FY 2023-24) 25%
Other domestic companies 30%

Special Tax Regimes

  • Section 115BAA: 22%

  • Section 115BAB (Manufacturing): 15%

  • Surcharge: Flat 10%

🔴 Major MAT Changes Introduced in Budget 2026

(Applicable from FY 2026-27 / AY 2027-28)

Key Reforms in Minimum Alternate Tax

(A) Reduction in MAT Rate

  • MAT rate reduced from 15% to 14%

  • Applicable to all companies except IFSC units

  • Surcharge and cess continue as applicable

(B) MAT to Become Final Tax under Old Regime

  • MAT paid under old regime will be treated as final tax

  • No fresh MAT credit allowed going forward

(C) Restriction on MAT Credit Set-off

  • Domestic Companies (New Regime):

    • MAT credit set-off limited to 25% of total tax liability

  • Foreign Companies:

    • Set-off allowed only to the extent normal tax exceeds MAT

10. Foreign Companies

Nature of Income Tax Rate
Royalty / FTS (old agreements) 50%
Other income 35%

  • Surcharge: 2% / 5%

  • Cess: 4%

  • MAT applicable unless exempted

11. Co-operative Societies

Normal Rates

Income Tax Rate
Up to ₹10,000 10%
₹10,001 – ₹20,000 20%
Above ₹20,000 30%

Optional Regimes

  • Section 115BAD: 22%

  • Section 115BAE (Manufacturing): 15%

  • AMT not applicable once opted

GSTR-3B Changes from Feb 2026: New GST ITC Rules Bring Relief to Taxpayers

To reduce taxpayer hardship, the GST Portal will roll out a major change in ITC utilisation from the January 2026 return period, relaxing the rigid utilisation sequence followed earlier.

1. Earlier ITC Set-Off Rule – Compliance Challenge

Statutory Position (Earlier Framework)

Under the earlier GST law and portal system, Input Tax Credit utilisation was subject to a strict and compulsory sequence:

  • IGST ITC was required to be utilised first:

    • Against IGST liability

    • Then against CGST liability

    • Then against SGST liability

  • CGST ITC could be utilised only:

    • Against CGST liability

    • Then against IGST liability

  • SGST ITC could be utilised only:

    • Against SGST liability

    • Then against IGST liability

❌ Direct cross-utilisation between CGST and SGST was not permitted.

Practical Difficulty for Taxpayers

Because of this rigid utilisation order, taxpayers often had to make cash payments, even when sufficient ITC was available under a different tax head. This resulted in blocked credits and avoidable cash outflow.

Illustration – Earlier Rule (Before January 2026)

Output Tax Liability

  • IGST: ₹1,00,000

  • CGST: ₹40,000

  • SGST: ₹40,000

Available ITC

  • IGST ITC: ₹1,00,000

  • CGST ITC: ₹50,000

  • SGST ITC: ₹50,000

Utilisation as per Earlier Rules

  • IGST ITC of ₹1,00,000 adjusted fully against IGST liability

  • CGST liability of ₹40,000 paid using CGST ITC

  • SGST liability of ₹40,000 paid using SGST ITC

✔ In this scenario, no hardship arose.

Problem Scenario Under Earlier Rules

  • Output IGST Liability: ₹80,000

  • Available ITC:

    • CGST ITC: ₹60,000

    • SGST ITC: ₹20,000

Under the old system:

  • CGST ITC could not be used to pay SGST

  • SGST ITC could not be used to pay CGST

➡ Result:
Despite total ITC being sufficient, cash payment became unavoidable due to utilisation restrictions. This was a common and recurring compliance issue.

2. New ITC Utilisation Rule – Effective from January 2026

What Has Changed?

🔹 System-level modification in Table 6.1 of GSTR-3B

From the January 2026 tax period onwards, once IGST ITC is fully exhausted, the GST Portal will allow utilisation of CGST and SGST ITC for payment of IGST liability in any sequence.

📌 This flexibility is enabled through the GST Portal system, without changing the basic statutory framework.

3. Salient Features of the New Rule

  • Applicable only after full utilisation of IGST ITC

  • CGST and SGST ITC can be used in any order

  • Cross-utilisation permitted only for IGST liability

  • Implemented through automated portal logic in GSTR-3B

  • Reduces cash outflow and accumulation of idle ITC

4. Illustration – New Rule (From January 2026)

Output IGST Liability: ₹80,000

Available ITC

  • IGST ITC: Nil

  • CGST ITC: ₹60,000

  • SGST ITC: ₹20,000

Utilisation under New Rule

  • CGST ITC utilised: ₹60,000

  • SGST ITC utilised: ₹20,000

➡ IGST liability fully discharged through ITC, with no cash payment

✔ Earlier: Cash payment was mandatory
✔ Now: Entire liability settled via ITC

5. Practical Impact on Taxpayers

✅ Significant Relief

  • Eliminates unnecessary cash payments

  • Prevents ITC pile-up under a single tax head

  • Improves liquidity and working capital efficiency

✅ Easier Compliance

  • System-driven utilisation suggestions

  • Reduced chances of manual errors

  • More logical and business-friendly ITC usage

6. Important Points to Remember

  • Direct cross-utilisation between CGST and SGST is still not allowed

  • Flexibility is permitted only for IGST liability

  • Applicable prospectively from January 2026

  • Taxpayers should analyse ITC balances before filing GSTR-3B

Budget 2026 Relief for Taxpayers: Penalty on Tax Audit Delay Removed from April 2026

Budget 2026 introduces a major compliance relief by replacing penalties with fixed mandatory fees for select procedural and technical lapses under the Income-tax Act.

The Government has recognised that penalties imposed for procedural or technical delays often result in avoidable litigation, even in situations where there is no revenue loss or any mala fide intent. To address this concern and provide greater certainty to taxpayers, Budget 2026 proposes to replace penalties for certain compliance failures with fixed or graded mandatory fees.

These amendments will come into force from 1 April 2026 and will apply from Tax Year 2026-27 onwards.

1. Change in Late Fee for Tax Audit – Section 446

Earlier Provision (Before Budget 2026)

Under Section 446, failure to get accounts audited or to obtain the audit report (without reasonable cause) attracted a discretionary penalty, being the lower of:

  • 0.5% of total sales / turnover / gross receipts, or

  • ₹1,50,000

Since the penalty was discretionary and turnover-linked, it frequently led to litigation, especially in cases involving minor or unintentional delays.

Proposed Amendment – Penalty Converted into Fee

Budget 2026 proposes to:

  • Omit the penalty provision under Section 446, and

  • Introduce a mandatory fee under proposed Section 428(c).

New Graded Fee Structure for Tax Audit Delay

Nature of Default Proposed Fee
Delay up to specified period ₹75,000
Delay beyond specified period ₹1,50,000

📌 The fee is mandatory, non-discretionary, and not linked to turnover or receipts, ensuring certainty in compliance.

Important Note:
While Section 446 has been removed for tax audit defaults, it has been re-purposed to deal with penalties related to failure to furnish or furnishing incorrect information on crypto asset transactions.

2. Change in Penalty for Transfer Pricing Audit Report – Section 447

Earlier Provision

Failure to furnish the accountant’s report under Section 172 (relating to international and specified domestic transactions) attracted a fixed penalty of ₹1,00,000 under Section 447.

Proposed Amendment

Budget 2026 proposes to:

  • Convert the penalty into a fee, and

  • Shift the provision to Section 428(4).

New Graded Fee Structure

Period of Delay Proposed Fee
Shorter delay ₹50,000
Longer delay ₹1,00,000

This change introduces proportionality and fairness, particularly for procedural delays without deliberate non-compliance.

3. Change in Penalty for Statement of Financial Transactions – Section 454(1)

Earlier Provision

Failure to furnish a Statement of Financial Transactions (SFT) or reportable account attracted a penalty of:

  • ₹500 per day for the period of default.

Proposed Amendment

Budget 2026 proposes to:

  • Convert the penalty into a mandatory fee, and

  • Shift the provision to Section 427(3).

This reflects the Government’s intent to treat technical reporting delays as compliance lapses rather than offences.

4. Capping of Penalty under Section 454(2)

Earlier Provision

If SFT was not furnished even after notice, a penalty of:

  • ₹1,000 per day was leviable

  • No maximum limit was prescribed

Proposed Relief

Budget 2026 introduces:

  • An upper cap of ₹1,00,000 on the penalty under Section 454(2)

This ensures certainty and prevents excessive penalties for prolonged but technical defaults.

5. Rationale Behind the Amendments

The Government has clearly stated that:

  • Penalties for technical defaults cause unnecessary litigation

  • Conversion into mandatory fees ensures certainty

  • Non-discretionary fees reduce arbitrary assessments

  • The reforms align with a trust-based, taxpayer-friendly tax administration

6. Effective Date & Applicability

  • Effective from: 1 April 2026

  • Applicable for: Tax Year 2026-27 onwards

  • Defaults relating to earlier tax years will continue under the old provisions

Penalties Converted into Fees – Summary Table

(Effective from 01.04.2026 | Tax Year 2026-27 onwards)

Nature of Default Earlier Penalty New Fee (Budget 2026)
Failure to get accounts audited Lower of 0.5% of turnover / receipts or ₹1,50,000 ₹75,000 / ₹1,50,000 (graded based on delay)
Failure to furnish TP Report (Sec 172) ₹1,00,000 ₹50,000 / ₹1,00,000 (graded fee)
Failure to furnish SFT / reportable account ₹500 per day (no cap) Fee under Section 427(3), capped at ₹1,00,000
Failure to furnish information (Sec 466) ₹1,000 ₹25,000 (fixed fee)
Budget 2026 Updates: Major Changes in GST Law

GST Changes Announced in Budget 2026 – Key Amendments Explained

The Finance Bill, 2026 proposes several significant amendments to the Central Goods and Services Tax Act, 2017 (CGST Act) with the intent of simplifying GST compliance, reducing litigation, and strengthening refund and appellate mechanisms.

Unless specifically stated otherwise, these amendments will become effective from a date to be notified, simultaneously with corresponding amendments by the States and Union Territories.

1. Amendment to Section 15(3): Post-Sale Discounts

Earlier Position

Post-sale discounts were allowed to be excluded from the value of supply only if:

  • The discount was agreed upon before or at the time of supply, and

  • The recipient reversed proportionate Input Tax Credit (ITC).

This condition led to frequent disputes where commercial discounts were offered after supply without explicit prior agreements.

Amendment Proposed (Finance Bill, 2026 – Clause 137)

  • The requirement of linking discounts to a pre-existing agreement has been removed.

  • Section 15(3) now allows exclusion of discounts based on issuance of a credit note under Section 34, subject to reversal of corresponding ITC by the recipient.

Impact

✔ Greater commercial flexibility
✔ Reduced valuation-related litigation
✔ Better alignment with real-world business practices

2. Amendment to Section 34: Credit Notes

Earlier Position

Section 34 did not explicitly link credit note provisions with valuation rules under Section 15, resulting in interpretational challenges.

Amendment Proposed (Clause 138)

  • Section 34 is amended to expressly reference Section 15.

Impact

✔ Clear legal linkage between valuation and credit notes
✔ Strengthens validity of post-sale discount adjustments
✔ Reduces objections during audits and assessments

3. Amendment to Section 54(6): Provisional Refund for Inverted Duty Structure

Earlier Position

Provisional refund of 90% was primarily available for zero-rated supplies, while refunds arising from Inverted Duty Structure (IDS) were excluded.

Amendment Proposed (Clause 139)

  • Provisional refund provisions are extended to IDS-related refunds.

Impact

✔ Improved cash flow for manufacturers
✔ Reduced working capital blockage
✔ Major relief for sectors with higher input tax rates

4. Amendment to Section 54(14): Removal of Refund Threshold Limit

Earlier Position

A threshold limit applied for sanctioning refunds, leading to procedural delays—especially for small exporters.

Amendment Proposed (Clause 139)

  • Threshold limit removed for refund claims relating to export of goods with payment of tax.

Impact

✔ Uniform refund processing
✔ Faster refunds for small exporters
✔ Reduced administrative discretion

5. Insertion of Section 101A(1A): Interim National Appellate Mechanism

Earlier Position

Conflicting Advance Ruling decisions were appealable to the National Appellate Authority (NAA), which was never constituted—leaving taxpayers without remedy.

Amendment Proposed (Clause 140)

  • New Section 101A(1A) empowers the Government to notify an existing authority or tribunal to hear such appeals until NAA is constituted.

  • Sub-sections (2) to (13) of Section 101A will not apply in such cases.

  • Explanation clarifies that “existing authority” includes a tribunal.

📌 Effective Date: 1 April 2026

Impact

✔ Resolves long-standing appellate vacuum
✔ Provides certainty in advance ruling disputes
✔ Strengthens GST dispute resolution framework

6. IGST Act Amendment: Place of Supply for Intermediary Services

Earlier Provision

Under Section 13(8)(b) of the IGST Act, intermediary services were deemed supplied at the location of the service provider, making overseas services taxable in India.

Amendment Proposed (Clause 141)

  • Section 13(8)(b) is omitted.

  • Place of supply will now be determined as per Section 13(2)—i.e., location of the recipient.

Impact

✔ Intermediary services to foreign clients qualify as export of services (subject to conditions)
✔ GST generally not applicable on such transactions
✔ Major relief for service exporters and consultants
✔ Long-pending litigation expected to subside

Conclusion

The GST amendments proposed in the Finance Bill, 2026 mark a decisive move toward taxpayer-friendly, litigation-free, and business-aligned GST administration. Key reforms in valuation, refunds, appellate remedies, and cross-border services are expected to significantly improve compliance efficiency and certainty.

Businesses and professionals should closely evaluate these changes and prepare for implementation once notified.

Budget 2026 Update: Changes in TDS and TCS from 1 April 2026

Budget 2026: Key Amendments in TDS & TCS Framework (Effective from 1 April 2026)

The Union Budget 2026 has introduced wide-ranging reforms in the TDS and TCS provisions under the Income-tax Act, 2025. These measures are aimed at rate rationalisation, simplification of compliance, removal of ambiguities, taxpayer relief, and selective decriminalisation of offences.

Unless specifically mentioned otherwise, all amendments will come into force from 1 April 2026 and apply from Tax Year 2026–27 onwards.

1. Rationalisation of TCS Rates – Section 394(1)

Earlier, Section 394(1) prescribed multiple and inconsistent TCS rates across different categories of transactions. Budget 2026 proposes to standardise TCS rates wherever feasible, while also granting rate relief in select cases.

Revised TCS Rate Structure

Sl. No. Nature of Receipt Existing Rate Proposed Rate
1 Sale of alcoholic liquor for human consumption 1% 2%
2 Sale of tendu leaves 5% 2%
3 Sale of scrap 1% 2%
4 Sale of minerals (coal, lignite, iron ore) 1% 2%
5(a) LRS remittance – education / medical treatment exceeding ₹10 lakh 5% 2%
5(b) LRS remittance – other purposes 20% 20% (unchanged)
6 Overseas tour programme package Tiered (5% / 20%) 2% flat

2. Overseas Tour Programme Package – Significant Relief

Earlier Regime

  • 5% TCS on amounts up to ₹10 lakh

  • 20% TCS on amounts exceeding ₹10 lakh

Budget 2026 Change

  • Uniform TCS rate of 2%

  • ₹10 lakh threshold removed

  • Applicable irrespective of transaction value

Impact

  • Substantial reduction in tax burden on travellers

  • Prevents diversion of business to foreign tour operators

  • Simplifies compliance for Indian tour operators

3. Liberalised Remittance Scheme (LRS) – Rate Reduction

For remittances under RBI’s LRS:

Purpose Earlier TCS Revised TCS
Education / Medical treatment (above ₹10 lakh) 5% 2%
Other purposes 20% No change

This amendment provides notable relief to students and individuals remitting funds for medical treatment abroad.

4. Electronic Filing for Lower / Nil TDS Certificates – Section 395

Earlier Position

  • Manual application before the Assessing Officer

  • Lengthy and compliance-intensive process

Amendment under Budget 2026

  • Payees can now apply electronically

  • Application to be made before a prescribed income-tax authority

  • Certificate may be:

    • Issued electronically, or

    • Rejected if conditions are not met or details are incomplete

Benefit

  • Faster processing

  • Improved transparency

  • Major compliance relief for small and medium taxpayers

5. TDS on Supply of Manpower – Ambiguity Clarified

Issue Earlier

Confusion existed on whether manpower supply should be classified as:

  • Contract work (1% / 2%), or

  • Technical / professional services (up to 10%)

Budget 2026 Clarification

  • Supply of manpower is explicitly included under “work” in Section 402(47)

Applicable TDS Rates

  • 1% – where payee is Individual or HUF

  • 2% – in all other cases

Outcome

  • Uniform tax treatment

  • Reduced litigation and interpretational disputes

6. Deduction Allowed to Non-Life Insurance Business for Delayed TDS

Earlier Issue

  • Expenses were disallowed if TDS was not deducted or paid on time

  • No explicit provision for allowing deduction in a subsequent year

Budget 2026 Amendment

  • Schedule XIV amended

  • New provision allows deduction in the year in which TDS is deducted and paid

Applicability

  • Non-life insurance businesses

  • Effective from AY 2026–27 onwards

7. Decriminalisation and Rationalisation of TDS/TCS Offences

Fully Decriminalised Defaults

Failure to deposit TDS relating to:

  • Lottery or crossword puzzle winnings

  • Benefits or perquisites arising from business or profession

➡️ No imprisonment prescribed

Revised Punishment Structure (Selected Cases)

Applicable to:

  • Online gaming winnings

  • Virtual Digital Asset (VDA) transactions

Amount of TDS Default Punishment
Above ₹50 lakh Imprisonment up to 2 years / fine / both
₹10 lakh – ₹50 lakh Imprisonment up to 6 months / fine / both
Other cases Fine only

Wholly in-kind transactions involving online gaming or VDAs are excluded from prosecution.

8. TDS on Sale of Immovable Property by Non-Residents – Procedural Ease

Earlier

  • Buyer was required to obtain TAN for TDS compliance

Now

  • TDS can be deposited using PAN-based challan

  • No TAN required

Impact

  • Simplified property transactions with NRIs

  • Reduced compliance burden for resident buyers

Effective Date

✔ 1 April 2026
✔ Applicable from Tax Year 2026–27 onwards

Closing Note

With these comprehensive reforms, Budget 2026 significantly reshapes the TDS–TCS landscape, balancing automation, relief, and enforcement. Taxpayers, professionals, tour operators, insurers, and businesses engaged in manpower supply or cross-border remittances should realign systems, contracts, and compliance processes well ahead of 1 April 2026.

New Income Tax Slab Rates in Budget 2026: FY 2026-27 (AY 2027-28), ITR Deadlines & TDS/TCS Rules

Key Income Tax & ITR Updates – Budget 2026

  • No change in income tax slab rates under either tax regime.

  • Simplified ITR forms will be introduced shortly to ease compliance.

📅 Revised ITR Due Dates (Non-Audit Cases)

  • Business & Trust cases: Due date extended from 31 July to 31 August

  • Other non-audit cases: Due date continues to be 31 July

🔁 Revised Return – Section 139(5)

  • Time limit to file a revised return extended from 31 December to 31 March of the relevant assessment year.

🔄 TDS & TCS Updates

  • TDS and TCS rates rationalised to reduce complexity and mismatches.

🏠 Property Purchase from NRI – Key Relief

  • TAN requirement removed for buyers of property from an NRI.

  • A PAN-based challan system has been introduced for payment of TDS, simplifying the compliance process.

    Income Tax Slab Rates – Default (New) Tax Regime

    The following income tax slab rates will apply to individuals opting for the default new tax regime for FY 2026-27 (AY 2027-28):

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

    These slab rates apply uniformly to all individuals, including salaried taxpayers, with no age-based differentiation.

    Key Features of the New Tax Regime

    1️⃣ Rebate under Section 87A

    Budget 2026 has enhanced tax relief through Section 87A:

    • Individuals with net taxable income up to ₹12,00,000 are eligible for a 100% tax rebate.

    • Consequently, the total tax liability becomes NIL for such taxpayers under the default regime.

    • This change significantly improves affordability for middle-income earners.

    2️⃣ Standard Deduction for Salaried Taxpayers

    • Salaried individuals can claim a standard deduction of ₹75,000 under the new tax regime.

    • Because of this deduction, effective tax-free income can extend up to ₹12.75 lakh.

    • This makes the default regime even more beneficial for salaried employees.

    Old Tax Regime (Optional)

    The old tax regime continues as an optional choice and follows a different slab structure. It allows various deductions and exemptions, such as HRA, Section 80C, Section 80D, and others.

    Income Tax Slabs under the Old Regime

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

    While deductions are permitted under the old regime, it does not provide the higher rebate threshold available under the new tax regime. As a result, it may be less beneficial for taxpayers with limited deductions.

    Which Tax Regime Is Better for You?

    • Taxpayers with minimal deductions or exemptions may benefit more from the new default tax regime due to lower slab rates, higher rebate, and standard deduction.

    • Taxpayers who claim substantial deductions, such as housing loan interest, insurance premiums, and eligible investments, may still find the old regime more suitable.

    • It is advisable to perform a comparative tax calculation before choosing the appropriate regime.

Budget 2026: Budget Speech, Highlights and Official Government Documents

The Union Budget 2026 is not limited to the Budget Speech delivered in Parliament. To fully understand the intent, scope, and legal implications of the Budget proposals, it is important to review the supporting documents released by the Government. These include the Budget Speech, the Memorandum explaining the provisions of the Finance Bill, and the Finance Bill, 2026 itself. Each of these documents has a specific purpose, and together they provide a complete picture of policy announcements, tax changes, and their practical implementation.

📄 Access all Budget Documents here: indiabudget.gov.in

While the Budget Speech outlines the Government’s vision and direction, the detailed impact of Budget 2026 is reflected in the Memorandum and the Finance Bill. Taxpayers and professionals should not rely solely on headlines or summaries but refer to these official documents for accurate information and compliance planning. Reviewing all Budget 2026 documents carefully is crucial to understanding tax implications, policy amendments, and their application in the upcoming financial year.

Income Tax Changes Announced in Union Budget 2026

Direct Tax Proposals in Budget 2026 – Key Highlights

In Union Budget 2026, the Government has announced a wide-ranging and future-oriented set of Direct Tax reforms aimed at simplifying tax laws, reducing disputes, improving compliance, and enhancing India’s appeal as a global investment destination. These measures signal a decisive shift from a complex, enforcement-driven regime to a trust-based, technology-enabled, and taxpayer-friendly tax system, aligned with the vision of Viksit Bharat.

1. New Income-tax Act, 2025 – A Structural Overhaul

One of the most significant announcements in Budget 2026 is the replacement of the Income-tax Act, 1961 with the Income-tax Act, 2025, effective from 1 April 2026.

The new legislation is designed to:

  • Be substantially shorter and simpler, with fewer sections and chapters

  • Use clear and unambiguous language to minimise interpretational disputes

  • Be easier for taxpayers and tax authorities to understand and implement

Simplified Income-tax Rules and redesigned return forms will be notified shortly, enabling individuals to comply without professional assistance.

2. Taxpayer Relief & Ease of Living Measures

The Budget introduces multiple measures to address long-standing taxpayer concerns:

MACT Interest Exemption

  • Interest awarded by the Motor Accident Claims Tribunal (MACT) to individuals will be fully exempt from tax.

  • No TDS will apply, irrespective of the amount received.

Rationalisation of TCS under LRS

  • TCS on overseas tour packages reduced to 2% (from 5% / 20%), without any threshold.

  • TCS on education and medical remittances under LRS reduced from 5% to 2%.

Clarity on TDS for Manpower Supply

  • Manpower supply services classified as contractor payments.

  • TDS rate capped at 1% / 2%, eliminating ambiguity and litigation.

Automated Lower / Nil TDS Certificates

  • Eligible small taxpayers can obtain lower or nil TDS certificates through an automated, rule-based system without Assessing Officer interaction.

Simplification of Form 15G / 15H

  • Depositories authorised to accept declarations centrally and share them with multiple companies, reducing repetitive filings.

3. Rationalised Return Filing Timelines

To ease compliance pressure:

  • Belated and revised returns can now be filed up to 31 March (earlier 31 December) on payment of a nominal fee.

  • Staggered ITR due dates introduced:

    • ITR-1 & ITR-2 (Individuals): 31 July

    • Non-audit cases and trusts: 31 August

4. Relief for Property Transactions Involving NRIs

For purchase of immovable property from a non-resident:

  • Resident buyers are no longer required to obtain a TAN.

  • TDS can be deposited using a PAN-based challan, similar to resident transactions.

5. One-Time Foreign Asset Disclosure Scheme (FAST-DS, 2026)

A special 6-month disclosure window has been introduced for genuine hardship cases involving small taxpayers.

Category A

  • Undisclosed foreign income / assets up to ₹1 crore

  • Payment of:

    • 30% tax

    • 30% additional tax (in lieu of penalty)

  • Immunity from prosecution granted

Category B

  • Foreign assets up to ₹5 crore

  • One-time fee of ₹1 lakh

  • Full immunity from penalty and prosecution

Immunity from prosecution is also retrospectively extended for non-immovable foreign assets up to ₹20 lakh.

6. Rationalisation of Penalty & Prosecution Regime

Key reforms include:

  • Assessment and penalty proceedings to be concluded through a single consolidated order

  • No interest on penalty amounts during pendency of first appeal

  • Pre-deposit for appeal reduced from 20% to 10%, limited to core tax demand

Updated Returns Post Reassessment

  • Taxpayers can file updated returns even after reassessment initiation by paying an additional 10% tax.

Penalty to Fee Conversion

  • Certain technical defaults (audit, TP report, SFT) converted into fee-based non-criminal defaults.

Decriminalisation Measures

  • Minor offences punishable only with fines

  • Maximum imprisonment reduced to two years

  • Penalties graded based on tax evasion quantum

7. Targeted Tax Relief for Cooperatives

  • Deduction extended to supply of cattle feed and cotton seed by primary cooperatives

  • Inter-cooperative dividend income allowed as deduction under the new tax regime

  • Three-year dividend exemption for notified national cooperative federations, subject to redistribution

8. IT Sector Boost & Transfer Pricing Certainty

  • IT and IT-enabled services consolidated under “Information Technology Services”

  • Uniform safe harbour margin of 15.5%

  • Threshold enhanced from ₹300 crore to ₹2,000 crore

  • Automated safe harbour approvals valid for 5 years

  • Fast-track unilateral APA with targeted 2-year resolution

9. Measures to Attract Global Business & Talent

  • Tax holiday till 2047 for foreign cloud service providers using Indian data centres

  • 15% safe harbour margin for data-centre support entities

  • 5-year tax exemption for non-residents supplying capital goods to bonded zone manufacturers

  • Exemption of global income for foreign experts residing in India up to 5 years

  • MAT exemption for non-residents taxed on presumptive basis

10. Tax Administration Reforms

  • ICDS to be merged with Ind-AS from FY 2027-28

  • Definition of “accountant” rationalised to support global expansion of Indian advisory firms

11. Other Key Direct Tax Measures

  • Buyback taxation shifted to capital gains for all shareholders

  • Additional tax for promoters to prevent arbitrage

  • TCS on liquor, scrap and minerals reduced to 2%; tendu leaves from 5% to 2%

  • STT increased on futures and options

  • MAT to become final tax from 1 April 2026, rate reduced to 14%, with limited MAT credit set-off

Conclusion

The Direct Tax proposals in Budget 2026 mark a bold move towards simplicity, certainty, and trust-based taxation. With a new Income-tax Act, substantial compliance relief, rationalised penalties, and strong incentives for investment and global integration, the reforms aim to strike a balance between revenue mobilisation and taxpayer confidence, supporting long-term economic growth.

GST Advisory on GSTR-3B Updates Applicable from February 2026

Advisory on Interest Collection and Related Enhancements in GSTR-3B

GSTR-3B Filing Service

It is hereby informed that from January-2026 period onwards, few enhancements have been made in filing of GSTR-3B. For detailed advisory, kindly click on the link given below:

https://tutorial.gst.gov.in/downloads/news/advisory_on_interest_calculator.pdfThanks,
Team GSTN

 

The GST Network has issued an important advisory titled “Advisory on Interest Collection and Related Enhancements in GSTR-3B”, bringing multiple system-level changes in the filing of Form GSTR-3B, effective from the January-2026 tax period onwards.

These changes primarily focus on:

  • Revised interest computation methodology
  • System-driven population of tax liability breakup
  • Flexibility in ITC cross-utilisation
  • Interest recovery in GSTR-10 for cancelled registrations

The enhancements aim to align portal functionality with Section 50 of the CGST Act, 2017 and Rule 88B of the CGST Rules, 2017, while reducing disputes and ensuring fair interest computation.

Update in Interest Computation for GSTR-3B (Table 5.1)

1.1 What Has Changed from January-2026?

From the January-2026 tax period onwards, the interest calculation in Table 5.1 of GSTR-3B has been enhanced to provide relief to taxpayers by factoring in the minimum cash balance available in the Electronic Cash Ledger (ECL).

This change is made in line with the proviso to Rule 88B(1) of the CGST Rules, 2017.

➡️ Practical impact:
If a taxpayer had sufficient cash balance lying in the Electronic Cash Ledger from the due date of return till the actual date of tax payment (offset), interest will not be charged on that portion.

Applicability Timeline

  • Applicable for delayed GSTR-3B returns of January-2026
  • Interest will be auto-populated in February-2026 GSTR-3B

Revised Interest Computation Formula

Interest = (Net Tax Liability – Minimum Cash Balance in ECL from due date to date of debit)
× (Number of days delayed ÷ 365)
× Applicable Interest Rate

Tax Planning Service

Key Takeaway

Earlier, interest was calculated on the entire net cash liability. Now, idle cash balance already available with the Government is reduced before interest computation — a major relief for compliant taxpayers.

System-Computed Interest in Table 5.1 – Now Non-Editable

Non-Editable Downward

From January-2026 onwards:

Taxpayer Education Course
  • Interest auto-populated in Table 5.1 will be non-editable downward
  • Taxpayers cannot reduce the system-computed interest

Upward Modification Allowed

  • Auto-populated interest represents minimum interest payable
  • Taxpayers must self-assess their correct interest liability
  • Upward modification is permitted, if required

➡️ Compliance Note:
Responsibility of correct interest payment continues to rest with the taxpayer, despite system computation.

Auto-Population of Tax Liability Breakup Table in GSTR-3B

What Is the Tax Liability Breakup Table?

This table captures:

  • Supplies pertaining to previous tax periods
  • Reported in current period
  • For which tax is being paid now

New Enhancement from January-2026

The GST Portal will auto-populate the Tax Liability Breakup Table based on:

  • Document dates
  • Supplies reported in:
    • GSTR-1
    • GSTR-1A
    • IFF
  • Pertaining to earlier tax periods
  • Where tax liability is discharged in current GSTR-3B

Objective of This Enhancement

  • Accurate period-wise allocation of tax
  • Correct interest computation as per proviso to Section 50 of CGST Act
  • Reduction in manual errors and litigation

Important Characteristics

  • Auto-populated values are suggestive in nature
  • Taxpayers may revise the figures upwards
  • Downward revision may attract scrutiny

Navigation Path on Portal

Login → GSTR-3B Dashboard → Table 6.1 (Payment of Tax) → Tax Liability Breakup

Update in Table 6.1 – Suggestive Cross-Utilisation of ITC

Change in ITC Utilisation Logic

From January-2026 onwards:

  • Once IGST ITC is fully exhausted
  • The portal will allow payment of IGST liability
  • Using CGST and SGST ITC in any sequence

Benefit to Taxpayers

  • Increased flexibility
  • Reduced working capital blockage
  • Alignment with judicial interpretations on ITC utilisation

Collection of Interest in GSTR-10 for Cancelled Taxpayers

New Provision Introduced

For cancelled GST registrations:

  • If the last applicable GSTR-3B is filed after due date
  • Interest on delayed filing shall be:
    • Levied
    • Collected through Final Return (GSTR-10)

Practical Implication

Taxpayers can no longer avoid interest liability merely because registration is cancelled. Interest compliance is now linked to GSTR-10 filing.

Overall Impact & Professional Analysis

Area Impact
Interest Computation Fair, cash-balance adjusted
Editability System minimum enforced
Tax Liability Allocation Automated & document-driven
ITC Utilisation Flexible & taxpayer-friendly
Cancelled Registrations Interest leakage plugged

The January-2026 enhancements in GSTR-3B mark a significant shift towards system-driven, legally aligned GST compliance. While automation reduces errors, self-assessment responsibility remains intact. Taxpayers and professionals must closely monitor cash ledger balances, document dates, and interest computation, especially in delayed filings and past-period adjustments.