In the Union Budget 2026-27, Finance Minister Nirmala Sitharaman kept the existing income tax slabs unchanged but introduced several measures aimed at simplifying compliance, reducing litigation, and easing the burden on small taxpayers and non-resident Indians (NRIs).
Key Highlights for Individual Taxpayers
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No change in tax slabs: The government has maintained the current tax rates under both the old and new regimes.
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Extended deadlines: Non-audit trusts now have until August 31 to file returns, while salaried individuals will continue to file by July 31.
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Simplified TDS and TCS rules:
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TDS on manpower supply services will be reduced to 1% or 2%, clarifying previous ambiguities.
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TCS on overseas tour packages has been lowered from 5%/20% to 2%, with no minimum amount threshold.
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TCS under the Liberalised Remittance Scheme (LRS) for education and medical purposes abroad is now 2%, down from 5%.
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Ease for small taxpayers: A new rule-based automated process allows small taxpayers to obtain lower or nil tax deduction certificates without manual applications.
Measures to Reduce Litigation
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Taxpayers can now update their returns even after reassessment proceedings have begun, by paying an additional 10% tax over the applicable rate.
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Penalty and prosecution frameworks have been rationalized, with many minor offences now decriminalized and certain penalties converted into fees.
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Immunity from penalty and prosecution for underreporting will now extend to cases of misreporting, provided full tax payment is made.
Benefits for NRIs and Foreign Investors
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Individual Non-Residents can now invest more in Indian equities through the Portfolio Investment Scheme (PIS), with the individual limit increased from 5% to 10% and the aggregate limit from 10% to 24%.
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TDS on sale of immovable property by non-residents will now be deducted through the buyer’s PAN, removing the need for a separate TAN.
Other Key Announcements
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Interest awarded by motor accident tribunals to individuals will be tax-exempt, and TDS will not apply.
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Timeline for revising returns has been extended to March 31 with a nominal fee.
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New provisions under the Income Tax Act 2025—effective April 1, 2026—are expected to further simplify compliance and reduce disputes.
While the tax slabs remain the same, the budget focuses on ease of compliance, reduced litigation, and transparency, making it simpler for individuals, small businesses, and NRIs to manage taxes. Experts say these reforms could improve cash flows, lower administrative hurdles, and encourage greater participation in the formal economy.