NEW DELHI: Union Finance Minister Nirmala Sitharaman on Sunday announced that there will be no changes in income tax rates or slabs, while confirming that the new Income Tax Act, 2025 will come into force from April 1, 2026. Presenting the Union Budget, she said the revamped law is aimed at simplifying compliance and making the tax system more citizen-friendly.
Sitharaman said simplified income tax rules and redesigned return forms will be notified in due course, ensuring taxpayers get adequate time to familiarise themselves with the new framework. The updated forms, she said, have been structured to enhance clarity and ease of compliance, particularly for ordinary citizens. The new Income Tax Act, which replaces the six-decade-old Income Tax Act of 1961, was passed by Parliament in August 2025.
The Finance Minister announced a significant reduction in Tax Collected at Source (TCS) under the Liberalised Remittance Scheme. The TCS rate for remittances made towards education and medical education has been cut from 5 per cent to 2 per cent. Similarly, the TCS on overseas tour packages will be reduced to 2 per cent from the existing 5 per cent. Notably, this rate had earlier been as high as 20 per cent.
To provide greater flexibility to taxpayers, Sitharaman proposed extending the deadline for revising income tax returns from December 31 to March 31, subject to the payment of a nominal fee. She also announced that the timeline for filing tax returns will be staggered to ease compliance pressure.
In a move to boost India’s digital infrastructure, the Finance Minister announced tax holidays until 2047 for foreign companies that use Indian data centres to deliver cloud services globally. However, such companies will be required to route services to Indian clients through an Indian reseller entity. She also said the government aims to complete advance pricing agreement (APA) procedures for IT services firms within two years.
Additionally, Sitharaman proposed a six-month foreign asset disclosure window for small taxpayers, including students, IT professionals and relocated NRIs. She clarified that no interest would be levied on penalty amounts during the appeal period before the first appellate authority. The Budget also proposed a three-year exemption on dividend income received by notified cooperatives for investments made up to January 31, 2026.
Reiterating last year’s announcement, Sitharaman noted that under the new tax regime, no income tax is payable on income up to Rs 12 lakh annually. With a standard deduction of Rs 75,000, salaried individuals earning up to Rs 12.75 lakh continue to have zero tax liability.