Hyderabad: The Income Tax Act, 2025 will come into effect from April 1, 2026, Union Finance Minister Nirmala Sitharaman announced. She made this announcement while presenting the Union Budget 2026–27 in Parliament on Sunday. The new Act promises a simpler tax regime and redesigned forms for easier compliance. Moreover, it offers reduced complexity for taxpayers.
To streamline tax procedures, a Joint Committee comprising the Ministry of Corporate Affairs and the Central Board of Direct Taxes will be formed. This body will integrate Income Computation and Disclosure Standards (ICDS) with Indian Accounting Standards (IndAS). As a result, it will remove the need for separate ICDS-based accounting from the 2027–28 tax year.
Additionally, the Finance Minister proposed a revision in the definition of “accountant” under Safe Harbour Rules. This aims to promote Indian accounting and advisory firms globally.
TCS and capital gains changes under the Income Tax Act 2025
The Budget rationalized Tax Collected at Source (TCS) rates to 2% for scrap, minerals, alcoholic liquor, and tendu leaves. For remittances under the Liberalised Remittance Scheme exceeding ₹10 lakh, TCS has been reduced to 2% for education and medical treatment. However, it remains at 20% for all other purposes.
To counter tax arbitrage through share buybacks, all shareholder categories will now be taxed under capital gains. Additionally, corporate promoters will face an extra buyback tax, pushing their effective tax to 22%. Meanwhile, non-corporate promoters will pay 30%.
The Securities Transaction Tax (STT) on futures will increase from 0.02% to 0.05%. STT on options—both premium and exercised—will rise to 0.15% from 0.1% and 0.125%, respectively.
For corporates opting into the new regime, the Budget allows MAT credit set-off up to one-fourth of tax liability. From April 1, 2026, MAT will be treated as final tax at a reduced rate of 14%. Nevertheless, credits accrued until March 31, 2026, will remain valid.