PAN Reporting Changes in 2026 Affecting Real Estate, Jewellery and Cash Payments

New PAN Reporting Rules 2026 for Property, Jewellery & Cash Transactions

The Central Board of Direct Taxes (CBDT) has issued the Draft Income-Tax Rules, 2026 to facilitate implementation of the Income-Tax Act, 2025, which will come into force from 1 April 2026.

Among the key proposed changes is a significant revision in the rules governing the mandatory quoting and use of Permanent Account Number (PAN) in various financial transactions.

The objective is twofold — simplify compliance for regular financial dealings while tightening reporting requirements for high-value and trackable transactions.

🧠 Why Are PAN Requirements Being Modified?

Under the existing Income-Tax Rules, 1962, PAN quoting was required for numerous transactions, often even at relatively modest monetary limits. This created additional compliance requirements for ordinary taxpayers.

The draft rules aim to rationalise this framework by:

✔ Increasing the threshold limits for PAN quoting
✔ Removing PAN requirements for small, routine transactions
✔ Concentrating on high-value and reportable dealings
✔ Integrating with the data-driven compliance system under the new Act

These reforms form part of the broader simplification exercise under the Income-Tax Act, 2025. Once finalised and notified (expected before 1 April 2026), the revised rules will take effect from that date.

📊 Major Changes in PAN Quoting Requirements

✅ 1️⃣ Cash Deposits and Withdrawals

Existing Rule:
PAN is required if cash deposits exceed ₹50,000 in a single day with a bank or cooperative bank.

Proposed Rule:
PAN will be required only where total cash deposits or withdrawals during a financial year aggregate to ₹10 lakh or more across one or more bank accounts.

👉 This substantially reduces compliance for small and routine banking transactions.

✅ 2️⃣ Purchase of Motor Vehicles

Existing Rule:
PAN is mandatory for purchase of four-wheelers irrespective of value (generally not required for two-wheelers).

Proposed Rule:
PAN will be required only if the vehicle value exceeds ₹5 lakh, covering both cars and two-wheelers.

👉 This relaxes compliance for lower-value vehicle purchases.

✅ 3️⃣ Immovable Property Transactions

Existing Rule:
PAN is required for purchase, sale, gift, or joint development of property valued above ₹10 lakh.

Proposed Rule:
The threshold is proposed to be increased to ₹20 lakh.

👉 Smaller property transactions will no longer trigger PAN quoting obligations.

✅ 4️⃣ Hotel, Event and Lifestyle Expenditure

Existing Rule:
PAN is required where hotel or restaurant payments exceed ₹50,000, including banquet halls and event management services.

Proposed Rule:
The threshold is increased to ₹1 lakh for payments made to hotels, restaurants, banquet halls, convention centres, and event organisers.

👉 Many routine lifestyle and event payments will no longer require PAN quoting.

✅ 5️⃣ Insurance Relationships

Existing Rule:
PAN is required where annual insurance premium exceeds ₹50,000.

Proposed Rule:
PAN will be mandatory for any account-based relationship with an insurance company, irrespective of premium amount.

👉 This widens the reporting scope for insurance-related transactions.

⭐ Transactions Where PAN Remains Compulsory

The draft rules do not relax PAN requirements for tax-sensitive or high-value activities, including:

  • Filing income tax returns

  • Significant investments

  • Corporate and business compliance

  • Statutory reporting obligations

PAN continues to remain a central identifier in the Indian tax framework.

📌 Timeline for Implementation

The Draft Income-Tax Rules, 2026 were placed in the public domain for stakeholder feedback until 22 February 2026.

The Government is expected to finalise and notify the rules before 1 April 2026, coinciding with the enforcement of the Income-Tax Act, 2025.

This interim period allows taxpayers, professionals, and businesses to examine the proposed changes and prepare accordingly.

🧾 Why These Changes Are Significant

🌟 Reduced Compliance Burden

Higher thresholds mean fewer transactions will require PAN quoting, easing paperwork for common citizens.

📊 Targeted Data Collection

By focusing on larger financial transactions, the tax system can collect more meaningful and relevant information.

💼 Improved Ease of Doing Business

Streamlined PAN requirements reduce procedural friction in everyday financial dealings.

📌 Important Note

The above revisions are currently in draft form and have not yet been officially notified. They are subject to stakeholder feedback and final approval before becoming legally enforceable.

GST and Income Tax Checklist: 20 Key Compliances Before 31 March 2026

GST & Income Tax Year-End Compliance Guide

With the financial year 2025–26 drawing to a close, 31st March 2026 becomes a critical deadline for businesses, professionals, exporters, and salaried taxpayers.

Several tax planning measures, compliance requirements, and strategic decisions must be finalised before the year ends. Failure to act within the prescribed timelines may result in additional tax burden, penalties, interest costs, or loss of eligible benefits.

Below is a comprehensive checklist to help you stay compliant and tax-efficient before the financial year

PART A – INCOME TAX ACTION POINTS BEFORE 31 MARCH 2026

1️⃣ Advance Tax Payment (Where Applicable)

If your total tax liability for FY 2025–26 exceeds ₹10,000:

  • Ensure the final instalment of advance tax (due on 15 March) has been paid

  • Reassess whether any shortfall exists

  • Clear remaining dues before 31 March to minimise interest under Sections 234B and 234C

Timely review can help avoid unnecessary interest costs.

2️⃣ Year-End Tax Planning & Investments

This is the final opportunity in the current financial year to:

  • Invest under Section 80C (LIC, PPF, ELSS, etc.)

  • Pay medical insurance premium under Section 80D

  • Contribute to NPS under Section 80CCD(1B)

  • Optimise HRA and other salary exemptions

  • Make eligible donations under Section 80G

Strategic planning before 31 March can substantially reduce overall tax liability.

3️⃣ TDS Deduction & Deposit Check

Before closing the books:

  • Confirm TDS has been deducted on all applicable payments

  • Review contractor, professional, rent, and commission payments

  • Ensure timely deposit of deducted TDS

Non-compliance may lead to:

  • 40% disallowance of expenditure

  • Interest and penalty exposure

Important – Time Limit for Old TDS Corrections:
As per Section 397(3)(f) of the Income-tax Act, 2025, correction statements relating to certain past financial years (FY 2018–19 onwards as specified) will be accepted only up to 31 March 2026. From 1 April 2026, these will become time-barred. Deductors and collectors should take necessary action immediately.

4️⃣ TCS Compliance Review

For persons required to collect TCS:

  • Verify correct collection

  • Deposit any outstanding amount

  • Reconcile TCS figures with books

This is especially important considering revised TCS rates effective from 1 April 2026.

5️⃣ Capital Gains Planning

Before the year ends:

  • Strategically plan sale of shares or property

  • Undertake tax-loss harvesting where beneficial

  • Invest in eligible exemptions under Sections 54, 54F, or 54EC

  • Deposit funds in the Capital Gain Account Scheme, if applicable

Advance planning helps lawfully optimise capital gains tax.

6️⃣ MSME Payment Compliance – Section 43B(h)

Businesses must:

  • Ensure payments to MSME vendors are made within 45 days

Failure to comply may result in disallowance of the expense in FY 2025–26. This is particularly relevant for traders and manufacturers.

7️⃣ Finalisation of Books & Reconciliation

Before 31 March, complete:

  • Bank reconciliations

  • Debtor and creditor confirmations

  • Physical stock verification

  • Cash verification

  • Loan account reconciliation

Proper year-end closure reduces audit observations and scrutiny risks.

8️⃣ Prepare for Income-tax Act, 2025 (Effective 1 April 2026)

From the next financial year:

  • The Income-tax Act, 2025 will replace the existing Act

  • New Income-tax Rules, 2026 will be notified

  • Forms will be renumbered and simplified

Professionals should:

  • Map old provisions with new ones

  • Update compliance trackers

  • Inform and educate clients

  • Upgrade systems and software

Advance preparation in March will prevent confusion in April.

PART B – GST ACTION POINTS BEFORE 31 MARCH 2026

9️⃣ Composition Scheme – Opt In / Opt Out

Eligible taxpayers must:

  • File intimation before 31 March

  • Review turnover limits

  • Ensure readiness for FY 2026–27

The option must be exercised before the new financial year begins.

🔟 Letter of Undertaking (LUT) for Exporters

Exporters should:

  • File fresh LUT for FY 2026–27 before 1 April 2026

  • Verify IEC and GST details

  • Update DSC credentials

Failure to file LUT may require payment of IGST on exports.

1️⃣1️⃣ QRMP Scheme Decision

Taxpayers with turnover up to ₹5 crore:

  • May opt in or opt out of QRMP

  • Decision deadline is 30 April, but review should be done before year-end

Turnover analysis is essential before opting.

1️⃣2️⃣ GTA – Forward Charge or Reverse Charge

Goods Transport Agencies must:

  • File required annexures

  • Choose between Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM)

  • Exercise option within prescribed timelines

This decision impacts tax collection structure for the upcoming year.

1️⃣3️⃣ Hotels – Declaration of Specified Premises

Hotels are required to:

  • Submit Annexure VII

  • Declare specified premises for GST rate determination

This directly affects GST rates applicable in the next financial year.

1️⃣4️⃣ ITC Reconciliation

Before year-end:

  • Match books with GSTR-2B

  • Reconcile GSTR-1 with GSTR-3B

  • Reverse ineligible ITC

  • Follow up with vendors for mismatches

March is ideal for cleaning ITC discrepancies.

1️⃣5️⃣ Review Reverse Charge Liability

Verify whether RCM has been correctly paid and reported for:

  • GTA services

  • Legal services

  • Director remuneration

  • Other notified categories

Ensure correct reporting in GSTR-3B.

1️⃣6️⃣ E-Invoicing Compliance Check

If turnover exceeds prescribed limits:

  • Ensure e-invoicing compliance from 1 April

  • Update ERP systems

  • Generate IRN correctly

Non-compliance attracts substantial penalties.

1️⃣7️⃣ Turnover Assessment for FY 2026–27

Review aggregate turnover to determine:

  • Eligibility for Composition Scheme

  • QRMP eligibility

  • Audit applicability

Proactive review supports smooth compliance next year.

1️⃣8️⃣ Update GST Registration Details

Before year-end, verify:

  • Bank account details

  • Business address

  • Additional place of business

  • Authorised signatory information

Accurate records help avoid future notices.

1️⃣9️⃣ Refund Review (For Exporters)

Exporters should:

  • File pending refund claims

  • Review inverted duty structure claims

  • Ensure documentation is complete

Avoid delaying claims unnecessarily.

2️⃣0️⃣ Clean Compliance Record

Before closing the year:

  • File all pending GST returns

  • Clear late fees

  • Respond to outstanding notices

  • Maintain proper documentation

A clean compliance history reduces risk under the evolving tax regime.

Final Thoughts

31 March 2026 is more than just the end of a financial year. It is:

✔ The final window for tax planning
✔ The deadline for key GST decisions
✔ An opportunity to rectify compliance gaps
✔ The preparation phase for the Income-tax Act, 2025

Ignoring these action points may result in:

  • Higher tax outgo

  • Interest and penalties

  • Loss of eligible benefits

  • Increased compliance burden in the next financial year

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.

👉 Click here to get …

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

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 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.

🔹 Income Tax Relief for Individuals There may be further rationalisation of income tax slabs, higher basic exemption limits, or enhancements in standard deduction to boost disposable income.

Union Budget 2026 – Overview and Expectations

India’s Union Budget 2026 is slated to be presented on 1 February 2026 (Sunday) by the Finance Minister. Although presenting the Budget on a Sunday had earlier triggered discussion, it has now been formally confirmed, and the government is fully prepared for this key fiscal announcement.

This Budget assumes added significance as it follows the introduction of the Income-tax Act, 2025, which focused mainly on simplifying legal language and compliance procedures rather than making major policy changes. As a result, Budget 2026 is expected to carry the primary burden of announcing substantive tax and regulatory reforms.

I. Economic Background & Budget Direction

India’s macroeconomic position remains relatively stable, supported by steady growth, moderated inflation, and sustained investment in infrastructure. Budget 2026 is expected to strike a careful balance between managing fiscal pressures in the short term and driving long-term structural reforms.

The government is likely to continue prioritising capital expenditure, welfare schemes, digital transformation, and regulatory certainty, with focused attention on sectors such as agriculture, healthcare, women empowerment, start-ups, and emerging areas of the new digital economy.

II. Key Expectations from Budget 2026

1. Taxation – Areas of Anticipated Change

Personal Income Tax
Large-scale rate cuts are not widely expected; however, revisions in tax slabs, exemption limits, or thresholds may be introduced to improve household spending power and stimulate consumption.

Capital Gains Tax
Existing capital gains provisions are under review. Rationalisation measures may be announced to improve clarity, simplify compliance, and encourage investment activity.

TDS Simplification
The government may streamline TDS provisions to reduce administrative and compliance challenges faced by businesses and taxpayers.

ESOPs and Foreign Tax Credit
Budget 2026 may bring clarity or relief measures related to ESOP taxation, particularly for employees of multinational companies, along with smoother mechanisms for claiming Foreign Tax Credit.

2. Sectoral and Social Priorities

Women-Centric Initiatives
Expect announcements aimed at improving women’s participation in the workforce, access to finance, skill development, and social security.

Agriculture and Rural Economy
Measures may include enhanced credit availability, farm modernisation programs, and targeted income-support mechanisms for farmers and rural households.

Senior Citizens
The government may extend or enhance benefits related to healthcare, savings, and taxation for senior citizens.

III. Virtual Digital Assets (Cryptocurrency) – Emerging Developments

1. Enhanced Monitoring, AML & KYC Framework

In early January 2026, the Financial Intelligence Unit (FIU) introduced tighter AML and KYC norms for crypto exchanges and VDA service providers. These measures aim to align the crypto ecosystem with mainstream financial regulations and improve traceability. Key elements include:

  • Live selfie verification using liveness detection to prevent misuse of static images or deepfakes

  • Geo-location capture, including latitude, longitude, IP address, date, and time for onboarding and transactions

  • Expanded KYC documentation, requiring PAN plus an additional government-issued ID along with OTP verification

  • Bank account authentication through penny-drop verification

  • Periodic KYC updates, with more frequent reviews for high-risk users

  • Continuous transaction monitoring and reporting of suspicious activities

These steps reflect the government’s intent to curb money laundering, terror financing, fraud, and misuse of anonymous crypto transactions, while strengthening investor confidence and systemic oversight.

2. Crypto Taxation – Industry Expectations

Under the current framework:

  • Gains from VDAs are taxed at a flat 30%, without allowing loss set-off

  • A 1% TDS applies on each transaction, which industry participants argue restricts liquidity and pushes traders to overseas platforms

For Budget 2026, crypto stakeholders are seeking:

  • Reduction in TDS (suggested at 0.01%) to improve market liquidity

  • Permission to offset losses against gains, bringing parity with other asset classes

  • More nuanced tax treatment, possibly based on holding period or integration with slab-based taxation

There is also discussion around establishing a clear regulatory authority structure, potentially involving SEBI for exchange oversight and RBI for cross-border monitoring, subject to Budget and post-Budget policy announcements.

IV. Indirect Tax and Regulatory Environment

GST and Customs

  • Industry is likely to seek GST rate rationalisation and faster processing of refunds

  • Customs duty structures may be reworked to support domestic manufacturing, technology adoption, and exports

Regulatory Coordination

Efforts are ongoing to move toward a single, well-defined regulatory framework for VDAs, reducing overlap among regulators and improving compliance clarity.

V. Core Themes Likely to Shape Budget 2026

Area Anticipated Focus
Taxation & Compliance Slab rationalisation, TDS simplification, crypto tax clarity
Digital Assets Stronger oversight, tracking mechanisms, regulatory structure
Women & Social Welfare Financial inclusion, employment, empowerment schemes
Agriculture & Rural Development Farmer support, rural infrastructure
Senior Citizens Health coverage and tax relief
Infrastructure & Capex Continued emphasis on public investment
Technology & Innovation R&D incentives, AI and digital economy push
Indirect Taxes GST simplification and customs duty rationalisation

In essence, Budget 2026 is expected to focus on stability, reform, and future readiness—combining fiscal prudence with growth-oriented policy measures across taxation, technology, and social development.

VI. Conclusion

Budget 2026 is expected to be a transformative fiscal roadmap, aimed at achieving sustainable economic growth, deeper social inclusion, and forward-looking regulatory reforms. In particular, the evolving approach toward the crypto and virtual digital asset ecosystem—marked by stricter KYC/AML requirements and closer regulatory supervision—signals the government’s intent to bring greater transparency, accountability, and investor confidence into the sector.

At the same time, market participants and industry stakeholders are looking toward the Budget for pragmatic tax rationalisation and clearer policy direction that encourages innovation and legitimate participation without diluting compliance standards. Overall, Budget 2026 is likely to reflect a careful balance between risk management and growth facilitation, reinforcing India’s commitment to a stable, inclusive, and future-ready economic framework.