New Delhi: Union Finance Minister Nirmala Sitharaman announced on Sunday that the Income Tax Act 2025 will come into force from April 1, 2026, bringing a major overhaul of India’s direct tax system.
She made the announcement while presenting the Union Budget 2026–27 in Parliament. The Finance Minister said the new law aimed to simplify tax provisions and reduce compliance pressure on taxpayers. She added that redesigned return forms would make filing easier for individuals and businesses.
To streamline procedures, the government will form a Joint Committee with members from the Ministry of Corporate Affairs and the Central Board of Direct Taxes. Officials said the panel would align Income Computation and Disclosure Standards with Indian Accounting Standards. This integration will remove the need for separate ICDS-based accounting from the 2027–28 tax year.
The Finance Minister also proposed revising the definition of “accountant” under the Safe Harbour Rules. Officials said the change would strengthen Indian accounting and advisory firms. The government expects this step to help domestic firms expand their global presence.
The announcement marked a key step in the Centre’s effort to modernise tax administration. Officials said the new framework would cut disputes and improve clarity for taxpayers.
Income Tax Act 2025 outlines TCS, STT and buyback tax changes
The Union Budget detailed several tax rate changes under the Income Tax Act 2025. The government rationalised Tax Collected at Source to 2% on scrap, minerals, alcoholic liquor and tendu leaves. For remittances above ₹10 lakh under the Liberalised Remittance Scheme, it cut TCS to 2% for education and medical treatment. However, it retained the 20% rate for other purposes.
To curb tax arbitrage through share buybacks, the government decided to tax all shareholders under capital gains provisions. Corporate promoters will now face an additional buyback tax. This change raises their effective tax burden to 22%. Non-corporate promoters will pay tax at 30%.
The Budget also increased the Securities Transaction Tax on futures from 0.02% to 0.05%. It raised STT on options to 0.15% on both premium and exercised contracts.
For companies that opt for the new tax regime, the Budget allows MAT credit set-off up to one-fourth of tax liability. From April 1, 2026, the government will treat Minimum Alternate Tax as a final levy at a reduced rate of 14%. Credits accumulated until March 31, 2026, will remain valid.
