02/02/2026
Budget Updates:
1. Tax Rates & Slabs (FY 2026-27)
Default Tax Regime: The tax rates for individuals, HUFs, AOPs, and BOIs under the new regime (section 202 of the IT Act, 2025) remain unchanged from the previous year, with the first ₹4,00,000 of income being tax-free.
Corporate Tax Rates: Domestic companies continue to be taxed at 25% if their turnover (FY 24-25) was up to ₹400 crore, and 30% otherwise.
Surcharge Limits: For individuals in the new regime, the maximum surcharge on dividend income and capital gains (sections 196, 197, 198) is capped at 15%.
Health and Education Cess: This remains at 4% across all categories of taxpayers.
2. Ease of Living & Compliance Procedures
Extended Filing Deadlines: The due date for filing returns for non-audit business cases and trusts is extended from July 31st to August 31st.
Centralized 15G/15H Filing: Taxpayers can now file declarations for no deduction of tax (Form 15G/15H) directly with a Depository for listed securities, rather than submitting them to every individual company.
Lower TDS Certificates: Payees can now apply electronically for certificates for lower or nil deduction of tax.
Updated Returns (ITR-U) Enhancements: * Taxpayers are now permitted to file an updated return even after a reassessment notice (under section 280) has been issued.
Filing an updated return is now allowed if it results in reducing a loss previously claimed in a return.
Revised Return Timeline: The time limit for filing a revised return is increased from 9 months to 12 months from the end of the relevant tax year.
3. NRI & Property Amendments
PAN-based TDS for NRIs: Resident individuals or HUFs buying property from a non-resident seller are exempt from obtaining a TAN; they can deduct tax using their PAN, simplifying the compliance for single transactions.
Motor Accident Claims Relief: * Interest income awarded by the Motor Accidents Claims Tribunal is now exempt from income tax for individuals.
Consequently, no TDS will be deducted on such interest payments.
4. Business & Sector-Specific Incentives
Cloud Computing Tax Holiday: Foreign companies providing data center services from specified Indian data centers are granted a tax exemption on that income until March 31, 2047.
Safe Harbour Limit Hike: The turnover threshold for the IT sector to qualify for safe harbour (simplified transfer pricing) is increased from ₹300 crore to ₹2,000 crore.
Electronic Manufacturing: Exemption is provided to foreign companies supplying capital equipment to Indian contract manufacturers in custom bonded areas until 2030-31.
Critical Minerals: The list of minerals eligible for deduction of prospecting and exploration expenses (under section 51) has been expanded to incentivize the mining sector.
Inland Vessels: Tonnage tax scheme benefits are extended and aligned with the Inland Vessels Act, 2021, to promote water transportation.
5. Corporate & International Taxation
Buyback of Shares: Consideration from share buybacks will now be taxed as Capital Gains in the hands of shareholders, rather than as dividends.
MAT Rationalization: * The Minimum Alternate Tax (MAT) rate for companies in the old regime is reduced from 15% to 14%.
Non-residents opting for presumptive taxation (e.g., cruise ships, electronics setup) are now excluded from MAT.
Advance Pricing Agreements (APA): Associated enterprises of a person entering an APA can now file modified returns to claim refunds or adjust tax liabilities.
6. Penalty, Prosecution & Decriminalization
Decriminalization of Technical Lapses: Offenses such as failure to afford facilities for inspection during search or certain TDS/TCS defaults are being decriminalized or downgraded to simple imprisonment and fines.
Foreign Asset Immunity (FAST-DS 2026): Small taxpayers with non-immovable foreign assets worth less than ₹20 lakh (e.g., bank accounts from old student days or ESOPs) are granted immunity from prosecution.
Penalty Conversion to Fee: Penalties for technical delays (like failure to get accounts audited or failure to furnish financial statements) are converted into mandatory fees to reduce litigation.
Immunity Expansion: The scope of immunity from penalty and prosecution is extended to cases of "under-reporting in consequence of misreporting," provided additional tax is paid.
Appellate Interest Relief: No interest will be charged on penalty amounts for the period an appeal is pending before the First Appellate Authority.
7. Changes in TDS & TCS Rates
TCS Rate Rationalization: A uniform rate of 2% is proposed for several items, including:
Sale of alcoholic liquor for human consumption (increased from 1%).
Sale of scrap (increased from 1%).
Sale of minerals like coal, lignite, or iron ore (increased from 1%).
Sale of tendu leaves (reduced from 5%).
LRS & Travel TCS: TCS on remittances for education/medical treatment (above ₹10 lakh) and on overseas tour packages is reduced to 2%.
Manpower Supply TDS: Clarity is provided that supply of manpower falls under the definition of "work" for TDS purposes.
8. Cooperative Societies
Dividend Deductions: Cooperatives can now claim deductions for dividends received from other cooperatives if they distribute them to their own members, even under the new tax regime.
Cattle Feed & Cotton Seeds: Deductions are extended to primary societies engaged in supplying cattle feed and cotton seeds.
Definition Expansion: Multi-State Cooperative Societies are now officially included in the definition of "co-operative society" under the Act.
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