Budget 2026–27: FM Announces Direct Tax Reforms To Ease Compliance

New Delhi, Feb 1 (KNN) A series of direct tax reforms were announced by Finance Minister Nirmala Sitharaman in the Union Budget 2026–27.

A key highlight is the introduction of the Income Tax Act, 2025, which will come into effect from 1st April 2026. Simplified rules and redesigned forms will be issued soon to make tax compliance more straightforward for ordinary citizens.

Several measures have been proposed to ease compliance and enhance taxpayer convenience. Interest awarded by the Motor Accident Claims Tribunal will be tax-exempt with no Tax Deducted at Source (TDS).

Tax Collected at Source (TCS) rates on overseas tour packages and education/medical remittances under the Liberalised Remittance Scheme (LRS) are reduced from 5–20 per cent to 2 per cent.

TDS on manpower services will be set at 1–2 per cent, simplifying contractor payments, while small taxpayers can obtain automated certificates for lower or nil TDS without approaching the assessing officer.

Depositories will directly submit Form 15G/15H to companies, easing compliance for investors with multiple securities. Return revisions are extended till 31st March for a nominal fee, with ITR 1 and 2 filings due by 31st July and non-audit business cases and trusts by 31st August.

TDS on property sales by NRIs will now be deducted using the resident buyer’s PAN, eliminating the need for a TAN.

The government has introduced a six-month One-Time Foreign Asset Disclosure Scheme to encourage voluntary declarations of foreign assets or income.

Under Category A, undisclosed income or assets up to Rs 1 crore can be regularised by paying 30 per cent tax plus 30 per cent additional tax, granting immunity from prosecution.

Under Category B, previously disclosed income or assets up to Rs 5 crore can secure immunity from penalties and prosecution by paying Rs 1 lakh.

The Finance Minister emphasised that these reforms aim to simplify compliance, reduce litigation, and align India’s tax framework with the evolving economic and digital landscape.

(KNN Bureau)