Indian nationals must prepare for the upcoming tax changes set to come into effect on April 1. Announced by Finance Minister Nirmala Sitharaman in the Union Budget in February, these reforms will change how individuals, businesses and investors calculate taxes, report income, and follow tax deducted at source (TDS) and tax collected at source (TCS) rules.
Many of these changes are part of the broader reforms in the taxation system, meant to simplify compliance. From rules on TDS and TCS to pension reforms, ITR deadline extension for certain categories and new tax exemptions, one must be aware of these key changes to stay updated and compliant with the latest rules.
From April 1, share buyback proceeds will be taxed as capital gains instead of deemed dividends. This means investors need to pay tax only on the profit earned. Earlier, such income was taxed as dividend at slab rates.
Securities Transaction Tax (STT) on derivatives will increase from April 1, following changes announced by Sitharaman in the Budget. STT on futures will rise to 0.05% from 0.02%. Meanwhile, STT on options premium and exercise will increase to 0.15%, up from the current 0.1% and 0.125% respectively.
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From April 1, capital gains tax exemption on Sovereign Gold Bonds (SGBs) will apply only to original subscribers who hold them until maturity. Investors who have bought SGBs from the secondary market through stock exchanges will now have to pay capital gains tax on redemption.
From April 1, taxpayers will not be allowed to claim deductions on interest expenses incurred to earn dividend income or income from mutual fund units. Such income will continue to be taxed under “Income from other sources,” but the earlier rule allowing interest deductions up to 20% of the income will be removed.
From April 1, investors can submit Form 15G or 15H directly to depositories to avoid excess TDS on dividends, interest from securities and mutual fund income. The change allows for a single submission for securities held in demat form, reducing administrative burden.
In the Budget, Sitharaman announced that TDS on property sales by non-residents has been simplified. From April 1, resident buyers can deduct and deposit TDS using their own PAN-based challan, eliminating the need for a Tax Deduction Account Number (TAN).
Budget 2026 has also proposed a uniform 2% TCS on foreign tour packages. This marks a relief from the earlier rule of 5% for packages up to Rs 10 lakh and 20% for those above Rs 10 lakh. The move also lowers TCS on education and medical expenses abroad under the liberalised remittance scheme.
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From April 1, India's minimum alternate tax (MAT) rate will fall to 14%. The revised rules will not allow new MAT credits and existing credits can be used only up to 25% of a company's tax bill annually.
The Union Budget 2026 has changed tax rules for defence personnel receiving disability pensions. From April 1, only those “invalidated” out of service due to bodily disability will get income tax exemption. Pensions for those retiring on superannuation will no longer be exempt. The exemption covers both the service and disability elements linked to military service.
Budget 2026 has proposed full income tax exemption for compensation received from the government when land is acquired under the RFCTLARR Act. Effective from April 1, the move clarifies previous
ambiguities and also ensures that payouts for compulsory land acquisitions are fully tax-free. Budget 2026 has also proposed extending the deadline for ITR of non-audit business cases and Trusts to Aug. 31. Most individual taxpayers with non-audit cases are still required to file their ITR by the regular July 31 deadline.
From April 1, interest from awards by the Motor Accident Claims Tribunal, received by claimants or their legal heirs, will be fully exempt from income tax. No TDS will be deducted in this case.
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