Union Budget 2026: New Income Tax Act from April 1; revised return deadline extended to March 31

Finance Minister Nirmala Sitharaman on Sunday announced that a new Income Tax Act will come into force from April 1, ushering in a simplified, rule-based tax framework aimed at reducing litigation and easing compliance for taxpayers.

Presenting the Union Budget 2026 in the Lok Sabha, Sitharaman said the rules and income tax return forms under the new Act will be notified shortly.

More time to file revised returns

In a major relief to taxpayers, the Finance Minister proposed extending the deadline for filing revised income tax returns from December 31 to March 31, subject to the payment of a nominal fee. The move is intended to give taxpayers additional time to correct errors and improve voluntary compliance.

Lower TCS for education, medical expenses and foreign travel

The Budget also proposed a reduction in Tax Collected at Source (TCS) under the Liberalised Remittance Scheme (LRS):

• TCS on education and medical treatment abroad to be reduced from 5% to 2%
• TCS on overseas tour packages to be cut from 5% to 2%

(The rate had earlier been as high as 20%)

Automated process for small taxpayers

Reinforcing the government’s push towards faceless and rule-based taxation, Sitharaman announced a fully automated system for small taxpayers, which will reduce direct interaction with tax authorities and speed up approvals in FY27.

Focus on simpler, litigation-free taxation

Sitharaman said the new Income Tax Act is designed to be clearer, shorter and easier to understand, replacing complex provisions with simplified language and rule-based processes.

The government expects the overhaul to strengthen taxpayer trust, reduce disputes and align India’s tax system with global best practices while maintaining revenue stability.
(With PTI inputs)