Union Budget 2026: CA Kirti Joshi Reviews Key Income Tax Proposals

Bhopal (Madhya Pradesh): The government has proposed several important changes in income tax laws with the objective of simplifying compliance, reducing litigation, and providing relief to taxpayers.

If implemented, these proposals will impact individuals, professionals, businesses, investors, and persons holding foreign assets. Below is a simple and easy-to-understand summary of the major announcements.

The due date for filing income tax returns has been revised for certain categories of taxpayers. Individuals earning income from business or profession whose accounts are not subject to tax audit, as well as partners of partnership firms, will now get additional time. Their return filing due date has been extended from 31 July to 31 August. However, for salaried employees, pensioners, and taxpayers earning income from house property, the due date will remain unchanged at 31 July. For taxpayers whose accounts are required to be audited, the due date of 31 October continues.

If a taxpayer makes an error in the return, a revised return can be filed up to 31 March of the relevant assessment year. However, if the revision is made after 31 December, late fees will apply. Taxpayers with income up to ₹5 lakh will have to pay a late fee of ₹1,000, while those with income above ₹5 lakh will pay ₹5,000, even in the case of revised returns.

Even after receiving a notice under Section 148, taxpayers can file an updated return within the prescribed time. In such cases, the taxpayer must pay the tax due, applicable interest, additional tax prescribed for updated returns, and an extra ten per cent tax on the total tax and interest amount.

Significant relief has been announced for motor accident victims. Interest received on compensation awarded by the Motor Accident Claims Tribunal will now be fully exempt from income tax, and no tax will be deducted at source on such interest.

For property transactions, procedural relief has been provided. When an individual or HUF purchases property from a Non-Resident Indian, tax can now be deducted at source without the need to obtain a TAN number.

The Budget proposes strict penalties for delays in filing tax audit reports. If the audit report is delayed by up to one month, a late fee of ₹75,000 will apply. For delays exceeding one month, the late fee will rise to ₹1,50,000.

In the capital markets, the Security Transaction Tax on futures has been increased from 0.02 per cent to 0.05 per cent. In options trading, STT on option premium and option exercise has been revised to 0.15 per cent.

Relief has also been proposed for employers regarding EPF employee contributions. If the employee’s contribution is deposited before the due date of filing the income tax return, it will not be treated as taxable income.

Tax under Section 115BBE on unexplained credits or investments has been reduced from 60 per cent to 30 per cent. Prosecution provisions have been softened by replacing rigorous imprisonment with simple imprisonment and reducing the maximum jail term.

To encourage voluntary compliance, a Foreign Assets Disclosure Scheme has been proposed. Small taxpayers with undisclosed foreign assets up to ₹1 crore can disclose them within six months by paying tax and additional tax, with protection from prosecution. Finally, a new simplified Income Tax law and reduced TCS rates on overseas education and tours aim to make taxation more taxpayer-friendly.