Budget 2026: Tax relief on overseas travel, education & medical costs; easy ITR filing in spotlight

New proposals in the Union Budget 2026-27 aim to simplify tax compliance and reduce costs for taxpayers, particularly on overseas transactions, education, and medical expenses.

Interest from motor accident claims exempt from tax

The Ministry of Finance announced that interest awarded by the Motor Accident Claims Tribunal to a natural person will now be exempt from Income Tax. This move is part of broader direct tax proposals aimed at easing citizens’ financial burdens.

Reduced Tax Collection at Source (TCS) rates

The Budget proposes several reductions in Tax Collection at Source (TCS) rates:

Overseas tour packages: TCS reduced from 5% and 20% to 2%, with no minimum transaction limit.

Education and medical purposes under the Liberalized Remittance Scheme (LRS): TCS reduced from 5% to 2%.

These changes are intended to make international travel, education, and medical expenses more affordable for Indian taxpayers.

Extended deadlines for revising returns

The Budget also introduces more flexible deadlines for revising tax returns. Taxpayers can now revise returns until 31st March by paying a nominal fee, instead of the earlier 31st December cut-off.

ITR 1 and ITR 2 filers will continue to submit returns by 31st July.

Non-audit business cases and trusts will now have time till 31st August to file returns.

These extensions aim to reduce the pressure on taxpayers and make compliance simpler.

Government focus on ease of living

Finance Ministry officials emphasised that these measures are part of a wider strategy to ease the financial burden on citizens, while encouraging timely and accurate tax compliance.