New Delhi, February 1, 2026: Union Finance and Corporate Affairs Minister Nirmala Sitharaman on Saturday presented the Union Budget for the financial year 2026–27, placing strong emphasis on “Kartavya” (duty) to sustain the momentum of structural reforms. The Finance Minister proposed a series of direct tax reforms aimed at simplifying the tax system and ensuring better compliance by citizens.
A key highlight of the Budget is the introduction of the new Income Tax Act, 2025, which will come into effect from April 1, 2026. To allow taxpayers sufficient time to familiarise themselves with the new law, simplified income tax rules and forms will be notified well in advance. The forms have been redesigned to make compliance easier and more user-friendly for the common taxpayer.
On tax administration, Sitharaman proposed the formation of a joint committee comprising officials from the Ministry of Corporate Affairs and the Central Board of Direct Taxes (CBDT). The committee will work towards incorporating the requirements of the Income Computation and Disclosure Standards (ICDS) into the Indian Accounting Standards (Ind AS). Separate accounting requirements based on ICDS will be discontinued from the financial year 2027–28.
To support the Prime Minister’s vision of positioning Indian accounting and advisory firms as global leaders, the Budget proposes rationalising the definition of “accountant” for the purpose of Safe Harbour Rules.
Among other tax proposals, the Budget seeks to curb misuse of share buybacks by promoters by taxing buybacks as capital gains for all shareholders. To discourage tax arbitrage, promoters will be required to pay additional buyback tax, resulting in an effective tax rate of 22 per cent for corporate promoters and 30 per cent for non-corporate promoters.
The Tax Collected at Source (TCS) rate for sellers of specified goods such as alcoholic liquor, scrap, and minerals has been rationalised to 2 per cent. TCS on tendu leaves has been reduced from 5 per cent to 2 per cent. Under the Liberalised Remittance Scheme, TCS will be 2 per cent on remittances above ₹10 lakh for education or medical purposes and 20 per cent for other purposes.
The Budget also proposes an increase in Securities Transaction Tax (STT) on futures from 0.02 per cent to 0.05 per cent, while STT on options premium and exercise has been raised to 0.15 per cent.
To encourage corporates to shift to the new tax regime, the Budget allows MAT credit only under the new regime, with set-off permitted up to one-fourth of the tax liability. From April 1, 2026, Minimum Alternate Tax (MAT) will become a final tax, with the rate reduced from 15 per cent to 14 per cent. Accumulated MAT credit up to March 31, 2026, will remain eligible for set-off under the revised provisions.