The Union Budget 2026 introduced several amendments to the Income Tax Act to make compliance easier and reduce procedural burdens for taxpayers. Replacing the existing Income Tax Act, 1961, the new Income Tax Act, 2025, officially applies to all taxpayers from 1 April 2026 onwards.
Taxpayers must prepare for the upcoming tax changes set to come into effect on April 1. Taxpayers must be aware of these latest rules and stay updated as these reforms will change how individuals calculate taxes, report income and follow taxation rules.
Here are 12 major changes taking effect from 1 April 2026
1. Share buyback proceeds to be taxed as capital gains
From April 1, the profits of share buybacks will be taxed as capital gains instead of deemed dividends. Investors will only have to pay tax on the profit earned. This will make the effective tax 22 percent for corporate promoters and 30 percent for non corporate promoters.
2. STT on derivatives to increase
Securities transaction tax (STT) will be raised on Futures to 0.05 percent from the current 0.02 percent from April 1. STT on options premium and exercise of options will both be increased to 0.15 percent from the present rate of 0.1 percent and 0.125 percent respectively.
3. SGBs to apply to original subscribers
Capital gains tax exemption on Sovereign Gold Bonds (SGBs) will apply only to original subscribers who hold them until maturity from April 1. Investors who have bought SGBs from the secondary market through stock exchanges will now be required to pay capital gains tax on redemption.
4. Deductions on interest expenses from dividends
Taxpayers will not be allowed to claim deductions on interest expenses incurred to earn dividend income or income from mutual fund units from April 1. Dividend income will be fully taxed at the applicable slab rates and the previous 20 percent interest deduction limit will be removed.
5. 15G or 15H could be submitted directly
From April 1, investors can submit Form 15G or 15H directly to depositories to avoid excess TDS on dividends, interest from securities and mutual fund income. The reform allows for a single submission for securities held in demat form which will reduce administrative burden.
6. No need for TAN
Resident buyers can deduct and deposit TDS using their own PAN-based challan from April 1. A Tax Deduction Account Number (TAN) will not be required.
7. MAT rate to fall
India’s minimum alternate tax (MAT) rate will fall to 14 percent from April 1. New MAT credits will not be allowed under the revised rules. Existing credits can be used only up to 25 percent of a company’s tax bill annually.
8. Remittance under LRS for overseas tour package
TCS rates have been reduced to a single flat rate of 2 percent without a threshold from the existing dual rate of 5 percent and 20 percent.
9. Remittance under LRS for education and medical treatment
The move also lowers TCS on education and medical expenses abroad under the liberalised remittance scheme. The TCS rate has been reduced from 5 percent to 2 percent.
10. Invalidated out of service due to physical disability
Only people who are ‘invalidated’ out of service due to physical disability will get income tax exemption from April 1. Pensions for employees retiring on superannuation will no longer be exempt. Both the service and disability elements linked to military service are covered by the exemption.
11. Payouts for compulsory land acquisitions
Budget 2026 has proposed a full income tax exemption for compensation received from the government when land is acquired under the RFCTLARR Act. The move ensures that payouts for compulsory land acquisitions are completely tax-free from April 1.
12. Motor Accident Claims Tribunal
Interest from awards by the Motor Accident Claims Tribunal which is received by claimants or their legal heirs, will be fully exempt from income tax from April 1. TDS will not be deducted in this case.
