Budget 2026: Continuity and Strengthening Systems Ahead of the New Income tax Act, 2025

The STT math: How a Rs 10,000-crore tax gain wiped Rs 10 lakh crore off market value

• Budget 2026 keeps personal income tax slabs unchanged
• TCS on overseas tours, education, and medical remittances cut to 2 percent
• Foreign Assets Disclosure Scheme aids small taxpayers with global assets.

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Presenting the Union Budget 2026 today, the government sought to address the competing priorities of economic growth, fiscal prudence, and taxpayer confidence. Against a backdrop of global uncertainty and domestic consolidation, the government has focused on incremental reforms aiming to strengthen compliance, improve transparency, and sustain long-term economic momentum. Budget 2026 prioritized TCS rationalization, foreign asset reporting transparency, and equity market liberalization keeping the personal income tax slabs unchanged.

The key announcements impacting individual taxpayers include the following:

1. Extended timelines for filing original and revised tax returns

Taxpayers will now be able to file revised returns up to 31 March, instead of the earlier deadline of 31 December, subject to payment of a nominal fee.

It also comes as a relief for individual taxpayers with cross-border income or investments, as tax filings in their home or host countries are usually not finalized by 31 December. Proposed extension would give them time to align their foreign income reported in the overseas tax returns with the income being reported in their India tax return.

In addition, the due date for filing original returns by taxpayers with non-audit business income and trusts is proposed to be extended from 31 July to 31 August. However, timelines for individuals filing ITR-1 and ITR-2 remain unchanged, ensuring consistency for taxpayers with relatively simple income profiles.

2. Rationalization of Tax Collected at Source (TCS) Rates

Significant boost from a cash flow perspective have been provided by rationalizing TCS on certain remittances under the Liberalised Remittance Scheme (LRS). The TCS rate on overseas tour program packages, as well as remittances for education and medical purposes, is proposed to be reduced to 2% from the existing 5% or 20%, offering meaningful relief to families.

3. Exemption to global income of “global talent” staying in India for a longer period

With an objective to attract global specialized talent working in India under government-notified schemes, the Budget introduces a new exemption for such individuals who were non-resident for 5 years preceding their first visit to India. Such individuals will be eligible for a five-year tax exemption on their foreign income.

4. Foreign Assets of Small Taxpayers Disclosure Scheme, 2026

Acknowledging that non-reporting of foreign assets is often inadvertent, arising from factors such as ESOPs or RSUs, dormant overseas bank accounts, legacy insurance policies, or savings accumulated during periods of non-residency, the government has introduced a Foreign Assets Disclosure Scheme for Small Taxpayers with a six-month compliance window.

The measure builds on the success of the recent NUDGE campaign, which resulted in nearly 25,000 revised returns and disclosures of approximately INR 29,000 crore in foreign assets and INR 1,000 crore in foreign income. By offering a structured opportunity for voluntary correction, the scheme seeks to encourage transparency while clearly distinguishing genuine reporting lapses from deliberate non-compliance.

Under the scheme, undisclosed foreign assets and income of up to INR 1 crore may be regularised on payment of tax at 30 per cent along with the prescribed levy. In cases where assets were acquired during periods of non-residency or out of income already taxed in India, a flat levy of INR 1 lakh will apply, provided the aggregate value of such assets does not exceed INR 5 crore. The scheme offers a fair and time-bound pathway for small taxpayers to rectify past omissions while reducing the risk of prolonged litigation.

Overall, the Union Budget 2026 signals a steady shift towards a more facilitative tax ecosystem, with an emphasis on simplifying procedures. It draws a clearer distinction between deliberate tax evasion and genuine reporting lapses, particularly in the context of global income and overseas assets. An attempt has been made to reflect a mature approach to tax administration, one that prioritises clarity, trust, and voluntary compliance.