MM TAX CLUB

The Union Budget 2026 has introduced a host of tax reforms and administrative measures aimed at simplifying compliance, reducing burdens on individuals and businesses, and fostering a transparent and efficient tax ecosystem. These initiatives are designed to enhance Ease of Doing Business and improve Ease of Living for taxpayers across India.

1. Simplifying Investments for Non-Residents

Persons Resident Outside India (PROIs) will now be allowed to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme (PIS). This step encourages foreign investment and strengthens India’s capital markets.

2. Tax Relief for Individuals

Several measures have been proposed to ease the financial burden on individuals:

• Exemption of interest awarded by Motor Accident Claim Tribunals to natural persons from income tax, with no TDS applicable.

• Reduction of TCS:

  • On overseas tour packages, from 5–20% to 2%, with no minimum threshold.

  • On education and medical remittances under Liberalized Remittance Scheme (LRS), from 5% to 2%.

• TDS on manpower services to be at 1% or 2%, reducing compliance costs.

• Obtaining lower or nil deduction certificates through a rule-based automated process for small taxpayers.

• Depositories can now accept Form 15G/15H from taxpayers holding securities in multiple companies.

3. Extending Timelines and Simplifying Compliance

• Time for revising income tax returns extended from 31st December to 31st March with a nominal fee.

• Filing deadlines maintained for individuals: ITR 1 & ITR 2 by 31st July, non-audit business cases or trusts by 31st August.

• TDS on sale of immovable property by non-residents can now be deducted through resident buyer’s PAN instead of TAN, simplifying compliance.

4. Supporting Small and Honest Taxpayers

• A one-time 6-month foreign asset disclosure scheme introduced for small taxpayers, allowing them to disclose below a certain asset size.

• Taxpayers can update returns even after reassessment by paying an additional 10% over the applicable tax rate.

• Penalty and prosecution immunity extended from underreporting to misreporting, promoting voluntary compliance.

• Decriminalisation: Non-production of books/documents and TDS non-compliance no longer attracts criminal liability.

• Immunity from prosecution for non-disclosure of non-immovable foreign assets under ₹20 lakh, retrospective from 1st Oct 2024.

5. Measures for Businesses

• Exemption from MAT for non-residents paying tax on a presumptive basis.

• Joint Committee of MCA & CBDT to integrate ICDS requirements into IndAS.

• Tax on share buybacks to be treated as Capital Gains, with promoters paying an additional buyback tax.

• Set-off using MAT credit allowed up to 1/4th of tax liability in the new regime.

• MAT proposed as final tax, simplifying compliance for companies.

6. Healthcare and Customs Reforms

• Exemption from Basic Customs Duty (BCD) on 17 cancer drugs/medicines.

• Single, interconnected digital window for cargo clearance approvals to reduce delays.

• Customs Integrated System (CIS) rollout planned over 2 years, promoting automation and efficiency.

7. Promoting Honest Tax Compliance

• Taxpayers willing to settle disputes voluntarily can close cases by paying an additional amount instead of penalties, encouraging transparent practices.

Conclusion

The 2026 tax reforms reflect a strong push towards simplifying compliance, reducing litigation, and incentivizing voluntary tax payments. By combining digitalization, process automation, and targeted exemptions, the government aims to enhance India’s Ease of Doing Business while improving the Ease of Living for individuals and businesses alike.