Income Tax New Rules: If you file Income Tax Returns, this news is of immense importance to you. As of April 1st, the entire tax system in the country has undergone a transformation—changes that will have a direct impact on the common man's pocket. The Central Government has introduced several significant amendments to the Income Tax laws within the Union Budget 2026, the effects of which will be felt directly by the average citizen. The primary objective of these changes is to simplify the tax-filing process; however, there are certain amendments that could potentially increase your expenses. Let us take a closer look at these 7 key changes. 1. New Income Tax Act to Come into Force The old Income Tax Act, which has been in force in the country since 1961, has now become history. From April 1st, the entirely new Income Tax Act, 2025, will come into effect. However, as a matter of relief, the government has not yet made any changes to the income tax slabs, and the ex...
Income Tax New Rules 2026: 7 Major Changes in Income Tax Act 2025 & ITR Filing Deadlines Effective April 1st
Income Tax New
Rules: If you file Income Tax Returns, this news is of immense importance to
you. As of April 1st, the entire tax system in the country has undergone a transformation—changes
that will have a direct impact on the common man's pocket. The Central
Government has introduced several significant amendments to the Income Tax laws
within the Union Budget 2026, the effects of which will be felt directly by the
average citizen.
The primary
objective of these changes is to simplify the tax-filing process; however,
there are certain amendments that could potentially increase your expenses. Let
us take a closer look at these 7 key changes.
1. New Income Tax Act to
Come into Force
The
old Income Tax Act, which has been in force in the country since 1961, has now
become history. From April 1st, the entirely new Income Tax Act, 2025, will
come into effect. However, as a matter of relief, the government has not yet
made any changes to the income tax slabs, and the existing slabs will continue
to apply. The new law focuses on simplifying the language and eliminating legal
complexities.
Major Changes in ITR
Filing Deadlines: Taxpayers will now have
more time to file their Income Tax Returns (ITR). The government has extended
the deadline for filing ITR-3 and ITR-4 to August 31st. Previously, this
deadline was July 31st. This facility will be available to taxpayers whose
accounts are not subject to audit. Meanwhile, the deadline for filing ITR-1 and
ITR-2 remains July 31st. No changes have been made to the tax audit deadline,
which remains October 31st.
New Provisions for Filing
Revised Returns: If you wish to make
corrections to your filed ITR, you will now have more time to do so. The
government has extended the deadline for filing revised returns from December
31st to March 31st. However, it is important to note that if you file a revised
return after December 31st, you will be required to pay an additional fee. Conversely,
there has been no change to the deadline for filing belated returns.
Several Key Changes in TCS
Rates: The government has
implemented several significant changes to the rates of Tax Collected at Source
(TCS), changes that directly impact your finances. TCS on the sale of liquor
will now be levied at a rate of 2%, up from the previous rate of 1%. Similarly,
the TCS on the sale of scrap has also been increased to 2%, up from the
previous 1%.
2. A
TCS (Tax Collected at Source) of 2% will now also be
applicable on the sale of minerals such as coal, lignite, and iron ore.
However, a welcome relief is that the TCS applicable on the sale of Tendu
leaves has been reduced to 2%, down from the previous rate of 5%.
Relief
in TCS Applicable to Foreign Travel: If you are planning a trip
abroad, this is good news for you. The government has simplified the TCS
applicable to foreign travel packages under the Liberalised Remittance Scheme
(LRS). A uniform rate of just 2% will now apply to such remittances, regardless
of the amount being sent. Previously, this was levied at two different rates:
5% and 20%. Similarly, the TCS applicable to funds remitted abroad for the
purposes of education and medical treatment has also been reduced to 2%, down
from the previous rate of 5%.
A Blow
to Share Market Traders: There is bad news for those trading in
Futures and Options within the stock market. The government has increased the
Securities Transaction Tax (STT). The STT applicable to Futures has now been
raised from 0.02% to 0.05%. Meanwhile, the STT applicable to Options has been
increased from 0.1% to 0.15%. This means that trading in the derivatives market
will now become more expensive than before.
Major
Changes Regarding Share Buybacks and Dividends: A new
tax regime has now come into effect regarding share buybacks undertaken by
companies. Effective today, Capital Gains Tax will be applicable to the
proceeds received from share buybacks. Previously, such proceeds were taxed by
treating them as 'deemed dividends.' Promoter shareholders will now be required
to pay a differential buyback tax at varying rates. Corporate promoters will be
required to pay this tax at a rate of 22%, while non-corporate promoters will
pay it at a rate of 30%.
A significant change has also
been introduced regarding dividend income. You will no longer be able to claim
any deduction for interest expenses incurred for the purpose of earning
dividends. Previously, a deduction of up to 20% was available on the interest
paid on loans taken to generate dividend income; however, this facility has now
been discontinued. Consequently, you will now be liable to pay tax on the
entire amount of the dividend income, in accordance with your applicable tax
slab.
What taxes do you pay on what? Where exactly is yourmoney deducted?
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