Finance Minister Nirmala Sitharaman tabled her ninth consecutive budget on Sunday and announced some changes for the tax slabs for the 2026-27 fiscal year (FY27). While Sitharaman announced no changed in the tax regimes, the Budget 2026 included major relief in TCS and compliance norms for taxpayers.
In her Budget 2026 speech, Finance Minister Nirmala Sitharaman unveiled a wide-ranging set of tax reforms and fiscal announcements aimed at simplifying compliance, easing pressure on small taxpayers and reinforcing India’s macroeconomic stability.
From fresh income tax relaxations and lower TCS rates to a foreign asset disclosure window and clarity on government borrowing, the proposals reflect a calibrated blend of fiscal prudence and administrative reform.
Fiscal Discipline Reinforced, Borrowing Roadmap Outlined
The government confirmed that it has fulfilled its commitment to reduce the fiscal deficit below 4.5 per cent of GDP by FY26. In the Revised Estimates (RE) for FY26, the fiscal deficit is pegged at 4.4 per cent of GDP. For FY26-27 (Budget Estimates), it is projected at 4.3 per cent of GDP.
The Finance Minister also set the debt-to-GDP ratio for FY27 at 55.6 per cent, signalling a continued emphasis on fiscal consolidation.
To fund its deficit, the government will borrow Rs 11.7 lakh crore in FY27 through dated securities. This borrowing plan provides clarity to bond markets and institutional investors tracking sovereign issuance.
Meanwhile, the 16th Finance Commission has recommended retaining the vertical share of devolution at 41 per cent. The Centre has allocated Rs 1.4 lakh crore for states for FY27, underscoring support for state-level spending while maintaining macroeconomic discipline.
Motor Accident Compensation Fully Exempt
In a move aimed at protecting compensation beneficiaries, any interest awarded by the Motor Accident Claims Tribunal will now be exempt from income tax. Further, any TDS on such interest will be done away with, ensuring that compensation payouts reach claimants without deductions.
Buyback Proceeds Treated as Capital Gains
The Finance Minister announced that tax treatment of buyback proceeds for all types of shareholders will now fall under capital gains. This provides uniformity and clarity for investors participating in share buybacks.
Extended ITR Deadlines Continue
The deadline for filing ITR-1 and ITR-2 will continue to remain July 31, offering continuity and certainty to salaried individuals and small taxpayers.
Additionally, the time available for revising income tax returns will be extended from December 31 to March 31, subject to payment of a nominal fee. This extended window allows taxpayers additional time to correct errors or omissions.
Non-audit business cases and trusts will now be permitted to file returns until August 31.
The New Income Tax Act will come into effect on April 1, the Finance Minister confirmed.
Taxpayers will be allowed to update their returns even after reassessment proceedings have been initiated, subject to payment of 10 per cent additional tax. The provision is designed to encourage voluntary compliance and reduce litigation.
Six-Month Foreign Asset Disclosure Scheme
The Finance Minister introduced a six-month foreign asset disclosure scheme for taxpayers. This window is expected to provide an opportunity for individuals to declare overseas assets and align with compliance requirements.
In addition, individuals who fail to disclose non-immovable foreign assets with an aggregate value of less than Rs 20 lakh will be granted immunity from prosecution. This exemption will apply retrospectively from October 1, 2024, easing compliance pressure for small-value foreign asset holders.
TCS Rationalisation: Relief for Travellers and Families
The government has proposed reducing Tax Collected at Source (TCS) on the sale of overseas tour programme packages to 2 per cent.
Further, TCS under the Liberalised Remittance Scheme (LRS) for education and medical purposes will be reduced from 5 per cent to 2 per cent. This move is expected to ease cash-flow pressures for families remitting funds abroad for higher education or medical treatment.
TCS on alcoholic liquor, scrap and minerals will be rationalised to 2 per cent. On tendu leaves, the rate will be reduced from 5 per cent to 2 per cent.
Simplified TDS for NRI Property Transactions
A major compliance simplification has been proposed for property sales involving non-residents. TDS on the sale of immovable property by NRIs will now be deducted and deposited by resident buyers using their PAN-based challan.
This eliminates the need for obtaining a TAN (Tax Deduction and Collection Account Number), reducing paperwork and streamlining cross-border property transactions.
Tax Holiday for Global Cloud Companies Till 2047
One of the long-term structural announcements in the Budget was a tax holiday till 2047 for foreign companies that provide cloud services by setting up data centres in India.
Global companies offering cloud services to customers worldwide through Indian data centres will qualify for the incentive. However, for Indian customers, services must be routed through an Indian entity.
The measure is aimed at strengthening India’s data infrastructure ecosystem and positioning the country as a global digital hub.
A Budget Focused on Stability and Simplification
Taken together, the announcements reflect a dual strategy. On one side, the government is reinforcing fiscal discipline with deficit reduction, a clear borrowing plan and a defined debt-to-GDP trajectory. On the other, it is easing compliance through extended filing timelines, lower TCS rates, simplified TDS procedures and targeted relief for small taxpayers.
With the New Income Tax Act set to take effect from April 1 and multiple procedural reforms lined up, Budget 2026 signals a push towards clarity, compliance and capital formation, while attempting to balance growth with macroeconomic prudence.
Further, Sitharaman announced no revisions in the tax slabs under the old and new income tax regime. Here's how the tax slabs stand now.
Income Tax Slabs Under Old Tax Regime
| Income Slabs (Lakh) | Tax Slabs (Old Regime) |
0-2.5 | Nil |
2.5-5 | 5% |
5-10 | 20% |
Over 10 | 30% |
Income Tax Slabs Under New Tax Regime
| Income Slabs (Lakh) | Tax Slabs (New Regime) |
0-4 | Nil |
4-8 | 5% |
8-12 | 10% |
12-16 | 15% |
16-20 | 20% |
20-24 | 25% |
Over 24 | 30% |
This budget presentation established Sitharaman as the finance minister with the highest number of back-to-back Budget presentations. Earlier, on February 1, 2025, she became the first individual to deliver eight successive Union Budgets, a milestone in India’s fiscal history.
Notably, Sitharaman holds the distinction of delivering the longest Union Budget speech in India’s parliamentary history. Her Budget 2020-21 address, presented on February 1, 2020, ran for 2 hours and 42 minutes (162 minutes), setting a record for duration. At the other end of the spectrum, her interim Budget speech in 2024 was her briefest since taking charge of the Finance Ministry, concluding in just 56 minutes. Today's speech, however, lasted 85 minutes.