New Delhi, Feb 1 (.) The Budget 2026-27 proposed a slew of direct tax reforms to simplify the tax regime and ensure better compliance by the citizens.
Finance Minister Nirmala Sitharaman announced a comprehensive review of Income Tax Act 1961 and the implementation of Income Tax Act 2025 from April 1st this year.
While presenting the budget in parliament here, she said, “I announced a comprehensive review of the Income Tax Act, 1961. This was completed in a record time and the Income Tax Act, 2025 will come into effect from 1st April, 2026.”
Coming on to tax administration, Sitharaman announced to constitute a joint committee of the Ministry of Corporate Affairs and Central Board of Direct Taxes for incorporating the requirements of Income Computation and Disclosure Standards (ICDS) in the Indian Accounting Standards (IndAS).
Separate accounting requirements based on ICDS will be done away with from the tax year 2027-28.
The Budget also proposed changes to address tax arbitrage in share buybacks, which will now be taxed as capital gains across all shareholder categories. The measure is intended to prevent misuse of buyback mechanisms and ensure a more equitable tax treatment among corporate and non-corporate investors.
Several rationalisation measures have been announced under Tax Collected at Source (TCS) to ease compliance.
TCS rates on certain goods such as scrap, minerals, and specified liquor products have been reduced, while rates on remittances under the Liberalised Remittance Scheme have been lowered for purposes such as education and medical treatment.
“I propose to reduce the TCS rate for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) from 5 per cent to 2 per cent” she said.
In the capital markets segment, Securities Transaction Tax (STT) rates on futures and options have been increased in line with evolving trading volumes and market practices, with the objective of ensuring appropriate taxation of high-frequency derivative transactions.
To encourage companies to transition to the new corporate tax regime, changes have been proposed in Minimum Alternate Tax (MAT) provisions.
“MAT is proposed to be made final tax. So, there will be no further credit accumulation from April 1, 2026. In line with this change, the rate of final tax is being reduced to 14 per cent from the current MAT rate of 15 per cent. The brought forward MAT credit of taxpayers accumulated till March 31, 2026, will continue to be available to them for set-off as above” she added.
Set-off of accumulated MAT credits will be allowed within the new regime up to a specified limit.
Overall, the direct tax measures announced in the Budget seek to simplify tax laws, close loopholes, reduce litigation, and create a more transparent and predictable taxation system, supporting both taxpayer confidence and long-term economic growth.
Reacting to the budget proposals, Adhil Shetty, CEO, BankBazaar said, “The union Budget 2026–27 signals a clear shift towards tax certainty, compliance efficiency, and a more consumer-friendly tax framework. For individuals, key direct tax measures offer tangible relief. The reduction in Tax Collected at Source on overseas education, medical expenses, and tour packages under the Liberalised Remittance Scheme to 2 per cent eases upfront cash-flow pressure for households. Extended timelines for revised returns, staggered ITR filing dates, and depository-led submission of Forms 15G and 15H further simplify compliance for salaried professionals, investors, and retirees. The exemption of interest awarded by Motor Accident Claims Tribunals and the rationalisation of several penalties into fee-based structures point to a more humane, trust-driven approach to tax administration,” Shetty said.
. SAS KK