Employment Tax

India | Union Budget 2026

Summary

Personal tax proposals

The Honourable Finance Minister presented the Union Budget 2026 on 1 February 2026. Building on the foundation laid last year, the Budget focuses on operationalising the Income-tax Act, 2025 from tax year 2026-27 with a primary objective of ease of living and simplifying the compliance burden for taxpayers.

The Budget proposals provide for rationalisation of penal and prosecution provisions and reducing litigation. For globally mobile resident individuals and NRls, the Budget introduces significant relief measures to address non-compliance relating to reporting of foreign assets/income.

The detail

The key proposals which are relevant for individual taxpayers are given below:

Tax regimes

• No changes in the slab rates, surcharge and cess under New Personal Tax Regime or Old Personal Tax Regime

Capital gains and income from other sources

• Buyback of shares (currently considered as dividend income) to be treated as capital gains. However, in case of promoters, additional tax being levied, making the applicable tax rate as:
  • 22% in case of domestic company
  • 30% in case of other promoters (including individuals)
• Capital gains arising with effect from 1 April 2026 on redemption of specified Sovereign Gold Bonds will be exempt only where the subscriber has held the bonds from subscription of original issue until its maturity.
• While computing dividend income and income from units of mutual fund, no expenditure will be allowed as a deduction from 1 April 2026 onwards.

Income tax return—due dates

The due dates for filing the income tax returns are as under:

Category	Existing due date	Proposed due date
Taxpayers not having business/profession income	31 July	No change
Taxpayers having business/profession/partner of a firm (non audit cases)	31 July	31 August
Taxpayers having business/profession/partner of a firm (audit cases)	31 October	No change

• The due date for filing a revised tax return has been extended from 31 December to 31 March by paying an additional fee of ₹1,000/ ₹5,000 (as applicable). The due date for filing a belated tax return continues to be the same i.e. 31 December.

Updated tax return

• An updated tax return may now be filed even after reassessment (re-audit) proceedings have been initiated, subject to payment of an additional 10% income tax over and above the prescribed tax and interest. Explicit protection from penalty in such cases.
• Taxpayers can now also file an updated tax return to reduce losses claimed in the original tax return.

Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)

Rationalisation of TCS rates:

Nature of payment	Existing tax rate	Proposed tax rate
Remittance under Liberalised Remittance Scheme (amount exceeding f 1,000,000)
Education or medical treatment	5%	2%
Purposes other than above	20%	No change
Sale of overseas tour programme packages	5% up to ₹1,000,000; 20% exceeding ₹1,000,000	2% without any threshold

• Resident individuals can now file a single declaration in the prescribed form (Form 15G/15H) with the depository for the purpose of nil withholding rate on all income from units, interest from listed securities and dividends. Presently, the prescribed form is required to be sent separately to each payer of such income.
• A rule-based automated process for small taxpayers will be introduced to obtain lower or Nil TDS/TCS certificate by filing the online application, subject to fulfilment of conditions as may be prescribed.
• Effective 1 October 2026, resident individuals and HUFs will no longer be required to obtain a Tax Deduction Account Number (TAN) for undertaking withholding tax compliance on consideration paid to a non-resident (other than a company) for transfer of immovable property. Tax Identification Number (PAN) can be used for above withholding purposes.

Litigation and rationalisation of penalty & prosecution provisions

• The tax rates on unexplained credit/investment/expenditure/asset etc. to be reduced from 60% to 30%
• Rationalization of litigation proceedings by:
  • Merging assessment and penalty proceedings into a single order
  • Remove interest liability on penalty during the pendency of appeal proceedings till first level of appeal
  • Pre-deposit requirement for stay of demand reduced from 20% to 10%
• An overhaul of prosecution provisions including decriminalization of several procedural and technical defaults, shift from punishments involving rigorous imprisonment to simple imprisonment, reduction in maximum imprisonment for prescribed offences, etc

Others

• A five year tax exemption would be available on foreign-sourced income (excluding income deemed to accrue or arise in India) for individuals visiting India for the first time in connection with a Central Government Scheme to be notified. To avail this exemption, such individuals should be Non-resident during last five tax years before such visit and fulfils such other conditions as may be prescribed.
• One-time Foreign Asset Disclosure Scheme, 2026 to allow eligible taxpayers to make a voluntary disclosure of undisclosed/unreported foreign income/assets by paying prescribed tax/fee (as applicable). This scheme will provide immunity from penalty and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (Black Money Act).
• Prosecution under Black Money Act shall not be initiated where the aggregate value of undisclosed foreign income or assets (other than immovable property) does not exceed ₹2,000,000. This amendment will align the threshold for applicability of both penalty and prosecution, as existing threshold applies only to the imposition of The change is effective from 1 October 2024.
• All individuals being Persons Resident Outside India (PROI) under the Exchange Control Regulation can now invest in equity instruments of listed Indian companies under the Portfolio Investment Scheme, extending the benefit beyond NRls and OCls. Overall individual investment limit is also increased from 5% to 10%.
• The Securities Transaction Tax rates on options and futures transaction to be increased.

Contact us

Vialto Partners provides comprehensive tax solutions, immigration services, compensation & rewards and dynamic work strategy & services to clients. For a deeper discussion on the above, please do reach out to your usual Vialto Partners contact or alternatively:

lshita Sengupta 
India Lead, Mumbai

Sundeep Agarwal 
Partner, Mumbai

Ravi Jain 
Partner, Bengaluru/Kolkata

Anand Dhelia 
Partner, Bengaluru/Hyderabad

Chander Talreja 
Partner, Delhi NCR

Hitesh Sharma 
Partner, Mumbai/Pune

Nishant Kumar 
Partner, Bengaluru

Sebin Jinny 
Partner, Bengaluru

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