‘Super Alert’ for Taxpayers! These 7 Major Tax Changes Are Coming into Effect from April 1, A Direct Impact on Your Pocket..

The Union Budget 2026 introduced several amendments to the Income Tax Act, aimed at simplifying regulations for taxpayers and reducing the procedural burden associated with compliance. Key changes include a reduction in TCS rates, an increase in STT, and an extension of the deadline for filing revised income tax returns. The government has also extended the due date for filing ITR-3 and ITR-4 for taxpayers who are not subject to an audit. Additionally, the government has announced measures such as providing a one-time opportunity for the voluntary disclosure of foreign assets. These changes will come into effect on April 1, 2026. Let us explain these details to you in greater depth.

The New Income Tax Act, 2025
The new Income Tax Act, 2025, will officially become applicable to all taxpayers starting April 1, 2026 (Financial Year 2026-27). It will replace the existing Income Tax Act of 1961. However, it is important to note that no changes have been made to the income tax slabs for the Financial Year 2026-27; the existing slabs will continue to remain in force. These changes are significant because the Income Tax Act has been in force in India since 1961. Since that time, however, substantial changes have taken place across the economy, technology, and even the labor sector.

Extension of the ITR Filing Deadline
As part of Budget 2026, the deadline for filing ITR-3 and ITR-4 has been extended for taxpayers who are not required to undergo an audit. They will now be able to file their returns by August 31, following the conclusion of the relevant tax year. This new deadline will also apply to the Financial Year 2025-26. However, no changes have been made to the deadline for filing ITR-1 and ITR-2. This deadline will remain July 31—as it was previously—following the end of the relevant tax year. The deadline for tax audits will remain October 31st, just as it was previously.

Change in the Deadline for Filing Revised ITRs
The deadline for filing revised returns has been extended from December 31st to March 31st of the relevant financial year. However, if a taxpayer files a revised return after December 31st, they will be required to pay an additional fee. Conversely, there has been no change to the deadline for filing belated returns.

Changes Introduced in TCS
Much like the previous budget, Budget 2026 has rationalized TCS (Tax Collected at Source) rates to simplify compliance, reduce delays in refunds, and eliminate confusion among taxpayers.

The following TCS rates will be applicable starting April 2026:

Sale of Liquor: The TCS rate on liquor will be increased from 1% to 2%.

Sale of Tendu Leaves: The TCS rate on the sale of this product will be 2%, a reduction from the previous rate of 5%.

Sale of Scrap: Budget 2026 has increased the TCS rate on the sale of scrap from the existing 1% to 2%.

Sale of Minerals (Coal, Lignite, or Iron Ore): The TCS rate on the sale of these products has been increased from 1% to 2%.

Remittances Sent Abroad Under LRS: The TCS rates have been reduced from the existing dual rates (5% and 20%) to a single uniform rate of 2%, applicable without any monetary threshold.

Remittances Sent Under LRS for Education and Medical Purposes: For the specific cases mentioned above, the TCS rate has been reduced from 5% to 2%.

Increase in Securities Transaction Tax
In what comes as a major blow to those trading in Futures and Options (F&O) within the Indian stock market, the Union Budget has announced an increase in the Securities Transaction Tax (STT) for the equity derivatives segment. According to the announcement, the Securities Transaction Tax (STT) on futures will be increased from 0.02% to 0.05%, and the STT on options transactions will be raised from 0.1% to 0.15%. These changes will come into effect starting April 2026. The Securities Transaction Tax is a direct tax levied on every purchase and sale of securities (such as equity shares, futures, and options) executed on government-recognized stock exchanges.

Changes in Buyback Taxation
The government has stated that, effective April 1, 2026, any proceeds received from the buyback of shares will be taxed as capital gains. Previously, proceeds from share buybacks were treated as 'deemed dividends' and were taxed according to the applicable income tax slab rates. However, promoter shareholders will be subject to a "differential buyback tax," the effective rate of which will be 22% for corporate promoters and 30% for non-corporate promoters.

Deduction of Interest Expenses Against Dividends
As per the Union Budget 2026, starting April 2026, taxpayers will no longer be able to claim deductions for interest expenses incurred to earn dividend income or income derived from mutual fund units. The deductions previously allowed for such interest expenses have been withdrawn; this implies that dividend income will be taxed fully according to the applicable income tax slab rates, thereby eliminating the previous limit of a 20% interest deduction.

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