by Shaini Theenseen

BUDGET AY 2026-2027 DECODED

WHAT IT REALLY MEANS FOR TAXPAYERS & BUSINESSES

The Union Budget 2026-2027, presented by Finance Minister Nirmala Sitharaman on February 1,2026, focuses on long term manufacturing, fiscal discipline and simplifying tax compliance rather than “big bang” populist giveaways.

For a Tax Practitioner, the Union Budget 2026-2027 is less about rate changes and more about a fundamental structural overhaul of the tax ecosystem. The headline for the fraternity is the sunset of the 1961 Act and the sunrise of a modernized Income Tax Act, 2025.

Here is the technical breakdown of the key highlights:

1. STATUTORY & COMPLIANCE OVERHAUL:

• Income Tax Act, 2025: The 1961 Act is being replaced effective April 1,2026. For Every Tax Practitioner, this means a massive “unlearning” and “relearning” exercise. This new Act aims to reduce cross-references and simplify language.

1. 1. No Change in Slabs: The existing tax slabs under the New tax regime  remain unchanged for FY 2026-2027. However, the Standard deduction remains at Rs. 75000, and those with income up to Rs. 12 lakh (taxable) continue to pay zero tax due to rebates.
   2. Revised Return: Revised Return filing extended up to 31^st March.
   3. Updated Returns: Updated returns allowed even after reassessment begins.
   4. Lower TCS: Tax Collected at source (TCS) on overseas tour packages and remittances for education/medical treatment has been slashed from 5%(or 20% in some cases) to a flat 2%.

• Staggered ITR Due Dates:

1. 1. July 31^stremains for salaried individuals (ITR-1/2)
   2. August 31^stis the new deadline for non audit business cases and Trusts.

This 1 month extension is a significant relief for practitioners managing small business clients.

• Extended Revision Window: Section 139(5) equivalent now allows revisions up to March 31(instead of Dec 31) with a nominal fee, providing a wider safety net for correcting errors discovered during audit procedure.

        2. CORPORATE & BUSINESS TAXATION

1. 1.  MAT Realignment: The Minimum Alternate Tax (MAT) rate has been reduced from 15% to 14%. Crucially, it is now being positioned as a final tax- no new MAT credit will accumulate after April 1, 2026. existing credits can only be utilized if the taxpayer stays in the New regime.
   2. Share Buyback (The Big Shift): Taxation is moving from the company (Sec 115QA) to the Shareholder.

• • • Proceeds will now be treated as Capital gains, not Dividends.
    • Anti- Arbitrage for Promoters: While retail investors pay standard LTCG/STCG rates, promoters face a higher effective tax(22% for corporate promoters; 30% for individuals) to prevent the misuse of buybacks for tax free cash extraction.

iii. TDS on Manpower:  Long- standing litigation on whether manpower supply is a “Professional Service”(194J) or “Contract”(194C)   is resolved; it is now explicitly classifies under Contact work (1% or 2%).

3. CAPITAL GAINS & INVESTMENTS:

• 1. Sovereign Gold Bonds(SGB): The tax exemption on maturity is now restricted to the original subscriber. Secondary market buyers will now face capital gains tax upon redemption, creating a valuation and tracking challenge for professionals.
  2. STT Hike:Securities Transaction Tax on F&O has been increased

• • • Futures:  0.02% to 0.05%
    • Options: 0.1% to 0.15% (on premium)

iii. Foreign Asset Disclosure: A one-time 6-month window for voluntary disclosure of oversees assets (below specified thresholds) offers a way to regularize “forgotten” ESOPs or foreign bank accounts without the harsh rigors of the Black Money Act.

4. OPERATIONAL EASE (THE TRUST-BASED MODEL):

1. 1. Automated NIL/Lower TDS:A rule based automated system will replace the discretionary manual approval process by the Assessing Officer for Section 197 certificates.
   2. NRI Property Sales: Buyers can now deposit TDS using their PAN-based challan instead of applying for a TAN, simplifying one-off transactions.
   3. Centralized 15G/H: Depositories will now handle 15G/H submissions for securities, reducing the volume of forms CAs need to track across multiple companies.

5. LITIGATION & PENALTY REFORMS: 

1. 1. Assessment + penalty combined in one order.
   2. No Interest on penalty during Appeal.
   3. Pre-deposit for Appeal reduced to 10%(from @20%)
   4. Decriminalisation of minor procedural defaults

CONCLUDING NOTE: 

From a professional standout, the emphasis is clearly on simplification, certainty and trust based compliance rather than rate deductions.

For taxpayers, the message is reassurance.

For professionals, the message is responsibility.

In conclusion, this is not a populist budget, but it is a mature, reform-oriented budget- one that eases procedural pain, reduces unnecessary litigation and allows tax professionals to focus more on value added advisory rather than firefighting.