New Delhi, Feb 1 (BVI) The New Income tax Act, 2025 will come into effect from April this year, Finance Minister Nirmala Sitharaman said today while presenting the Budget 2026 in Parliament.
She also said that simplified Income Tax Rules and Forms will be notified shortly. The forms for the purpose are redesigned for easy compliance of ordinary citizens.
Among the various proposals she made in the Budget, she said there will be reduction in the TCS rates.
The Overseas tour program package is reduced from the current 5 percent and 20 percent to 2 percent without any stipulation of amount.
Further, TCS for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) reduced from 5 percent to 2 percent.
It is also proposed that the supply of manpower services to be brought within the ambit of payment to contractors for the purpose of TDS.
TDS on these services will be at the rate of either 1 percent or 2 percent only. For small taxpayers, a rule-based automated process will enable obtaining a lower or nil deduction certificate instead of filing an application with the assessing officer.
Also, the time available for revising returns is proposed to be extended from 31st December to up to 31st March with the payment of a nominal fee.
Further, the timeline for filing of tax returns is to be staggered.
To address practical issues of small taxpayers, a One-time 6-month foreign asset disclosure scheme for students, young professionals, tech employees, relocated NRIs, and such others to be introduced to disclose income or assets below a certain size.
Rationalising Penalty and Prosecution
With a view to rationalizing penalty and prosecution, the Union Budget 2026-27 proposes to reduce the multiplicity of proceedings.
Assessment & penalty proceedings will be integrated by way of a common order for both.
Further, the quantum of pre-payment will be reduced from 20 percent to 10 percent, calculated only on core tax demand.
In order to reduce litigations, taxpayers will be allowed to update their returns even after reassessment proceedings have been initiated, at an additional 10 percent tax rate over and above the rate applicable for the relevant year.
The Budget proposes to extend the provisions for immunity from penalty and prosecution in the cases of under reporting, to misreporting as well.
Taxpayer will need to pay 100 percent of the tax amount as an additional income tax over and above the tax and interest due.
In addition, prosecution framework under the Income Tax Act will be rationalized.
Non-production of books of account and documents, and requirement of TDS payment, where payment is made in kind, will be decriminalised.
Non-disclosure of non-immovable foreign assets with aggregate value less than 20 lakh rupees will be provided with immunity from prosecution with retrospective effect from 1.10.2024. (BVI)
