6 Major income tax changes from April 1: What you need to know for your pocket and ITR

New Delhi (The Uttam Hindu): The Union Budget 2026 has made several important amendments to the Income Tax Act to provide relief to taxpayers and simplify regulations. All these new rules and changes will come into effect nationwide from April 1, 2026. While the government has relaxed the deadline for filing ITR, it has also made significant changes to the rules related to the stock market and TCS. It is crucial for taxpayers to understand the direct impact this will have on their finances and tax planning in the new financial year.

The old law will be abolished and the new Income Tax Act 2025 will be implemented

The Income Tax Act of 1961, which has been in place for decades, is now officially set to be phased out. In its place, the "New Income Tax Act of 2025" will be applicable to all taxpayers from April 1, 2026 (financial year 2026-27). This step has been taken in view of the major changes in the economy and technology. However, the biggest relief for the common man is that there has been no change in the income tax slabs for the financial year 2026-27, and the old rates will remain in effect. The government has also provided a one-time opportunity to disclose foreign assets.

Major relaxation in the last date for filing ITR

The government has provided significant relief to businesses and professionals. For taxpayers who are not subject to audit, the deadline for filing ITR-3 and ITR-4 has been extended to August 31st. This new rule will apply directly to the financial year 2025-26. However, for salaried and general taxpayers, the deadline for filing ITR-1 and ITR-2 remains unchanged; it remains July 31st. Furthermore, the deadline for tax audits remains October 31st.

New deadline for revised returns, but subject to additional fees

If you make a mistake while filing your ITR, the government has provided additional time to correct it. The last date for filing revised returns has been extended from December 31st to March 31st of the relevant financial year. However, a significant condition has been added: if a taxpayer files a revised return after December 31st, they will have to pay an additional fee or penalty. There has been no change in the deadline for filing belated returns.

There has been a significant change in the TCS rates

Budget 2026 has significantly rationalized TCS rates to eliminate refund delays and regulatory confusion. According to the new rules, effective April 1, the TCS rate on the sale of liquor, scrap, and minerals (coal, iron ore, etc.) has been increased from 1% to 2%. Conversely, the rate on the sale of tendu leaves has been reduced from 5% to 2%. Major relief has also been provided for remittances abroad (LRS). TCS rates have been uniformly reduced to 2%, eliminating the hassle of double taxation on remittances abroad for education, medical treatment, or any other purpose.

STT dealt a major blow to F&O traders in the stock market

These new rules are a major setback for investors trading in futures and options (F&O) in the Indian stock market. The government has significantly increased the Security Transaction Tax (STT) in the equity derivatives segment. According to the announcement, the STT on futures will increase from 0.02% to 0.05% from April 1. Meanwhile, the tax on options transactions has been increased from 0.1% to 0.15%, directly impacting trader costs.

Tightening of tax on share buyback and dividend income

Rules have also been tightened regarding share buybacks by companies. From April 1, 2026, any proceeds from share buybacks will be taxed as capital gains, whereas previously, they were considered deemed dividends. Promoters will have to pay a separate differential buyback tax (22% for corporates and 30% for non-corporates). The 20% deduction for interest expenses on dividend income or mutual fund earnings, which was previously available, has also been completely removed. Dividend income will now be taxed at full tax based on your slab rate.