Union Budget 2026–27: Complete Income Tax, GST & Compliance Updates
(As per Finance Bill 2026 & February 2026 Updates)
Published by: Fair Tax – Tax Professionals
Month: February 2026
Introduction
The Union Budget 2026–27 introduces far-reaching statutory changes across Income Tax, GST, MCA, and compliance procedures. These changes are not merely policy announcements but legislative proposals backed by specific rates, limits, timelines, and statutory amendments.
This blog presents a detailed and factual summary of all key provisions exactly as proposed in the Union Budget 2026–27 and subsequent departmental updates, as compiled in our February 2026 Monthly Newsletter.
The objective is to help taxpayers, businesses, and professionals understand what has changed, from when it applies, and how it impacts compliance.
1. Income Tax Act, 2025 – Effective Date & Applicability
The Finance Bill, 2026 states that:
- A comprehensive review of the Income-tax Act, 1961 has been completed
- The Income Tax Act, 2025 shall come into force from 1 April 2026
- Simplified Income Tax Rules and Forms will be notified separately
- Return forms will be redesigned so that ordinary citizens can comply without difficulty
Applicability:
These provisions apply from Tax Year 2026–27 onwards.
2. Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 (FAST-DS 2026)
The Finance Bill, 2026 proposes a time-bound voluntary disclosure scheme for small taxpayers having:
- Undisclosed foreign assets, or
- Undisclosed foreign-sourced income
Key Features (as proposed):
- Tax or fee payable based on:
- Nature of asset
- Source of acquisition
- Limited immunity from:
- Penalty
- Prosecution under the Black Money Act
- Exclusions:
- Cases involving prosecution
- Proceeds of crime
Effective date:
To come into force from a date to be notified.
3. Minimum Alternate Tax (MAT) – Rate & Credit Restrictions
Existing MAT framework revised as follows:
- MAT shall become a final tax from 1 April 2026
- MAT rate reduced from 15% to 14%
- Set-off of brought-forward MAT credit:
- Allowed only under the new tax regime
- Limited to one-fourth (25%) of the tax liability
- MAT credit accumulated up to 31 March 2026:
- Will continue to be available
- Subject to the above limitation
Applicability:
From AY 2026–27 onwards
4. Securities Transaction Tax (STT) – Revised Rates
The Budget proposes an increase in STT on derivative transactions:
| Instrument | Existing Rate | Proposed Rate |
| Futures contracts | 0.02% | 0.05% |
Applicability:
As per provisions specified in the Finance Bill, 2026
5. Tax Collected at Source (TCS) under LRS – Revised Rates
Overseas Tour Programme Packages
- Earlier rates: 5% / 20%
- Proposed rate: 2%
- No threshold limit
Education & Medical Remittances (LRS)
- Earlier rate: 5%
- Proposed rate: 2%
This applies to remittances under the Liberalised Remittance Scheme (LRS).
6. Income-tax Return Filing – Revised Due Dates
The Budget proposes staggered timelines:
| Category | Due Date |
| ITR-1 & ITR-2 (Individuals) | 31 July |
| Non-audit business cases & trusts | 31 August |
7. Buy-back of Shares – Change in Tax Head & Rates
The Finance Bill, 2026 proposes:
- Buy-back consideration to be taxed under Capital Gains
- Earlier treatment as dividend income withdrawn
Effective tax incidence:
- Promoters (individuals): approx. 30%
- Promoter companies: approx. 22%
Applicability:
From 1 April 2026 (Tax Year 2026–27 onwards)
8. Rule-based Automated Lower / Nil TDS Certificates
- Small taxpayers can obtain lower or nil TDS certificates
- No approach to Assessing Officer required
- Issued through electronic, automated process
- As prescribed under Income-tax Act provisions
Effective date:
1 April 2026
9. Revised & Updated Returns – Extended Time
- Revised Income-tax Return allowed up to 31 March
- Subject to payment of prescribed nominal fee
- ITR-U permitted even for loss returns, provided:
- Updated return results in reduction of loss
10. Interest Deduction on Dividend & Mutual Fund Income
The Finance Bill, 2026 proposes:
- Complete disallowance of interest expenditure against:
- Dividend income
- Income from mutual fund units
Earlier limited deduction withdrawn.
Effective date:
1 April 2026
11. Tax Audit Report – Fixed Late Fee (Not Penalty)
Under Income Tax Act, 2025:
| Delay Period | Late Fee |
| Up to 1 month | ₹75,000 |
| More than 1 month | ₹1,50,000 |
Penalty-based regime replaced.
12. PF & ESI – Employee Contribution Deduction
- Employee contribution to PF / ESI allowed if:
- Deposited on or before due date of filing ITR
- Aligns employee contribution with employer contribution
Applicable from:
AY 2026–27
13. TAN Relaxation for Property Purchasers
- Resident individuals / HUFs purchasing property from non-residents:
- No requirement to obtain TAN
- Applicable to one-time property transactions
Effective from:
1 October 2026
14. GST Changes – As Notified
Post-Sale Discounts
- Pre-existing agreement requirement removed
- Discount excluded from value if:
- Credit note issued
- ITC reversed by recipient
Intermediary Services – Place of Supply
- Section 13(8)(b) omitted
- Place of supply = location of recipient
- Services to foreign clients qualify as exports / zero-rated
RSP-Based Valuation (Tobacco / Pan Masala)
- Value of supply = Declared RSP minus GST
- Effective from 1 February 2026
- New Rule 31D inserted
15. GST Appellate Tribunal (GSTAT)
- Benches allocated across India
- Members to join from 21 January 2026
- First 6 months – lenient scrutiny of appeals
- Procedural defects not to be raised initially
16. Important Statutory Due Dates (Feb–Mar 2026)
Includes:
- 20-02-2026 – GSTR-3B (Jan 2026)
- 15-03-2026 – Advance Tax (4th instalment FY 2025–26)
- 31-03-2026 –
- ITR-U (FY 2021–22)
- LUT Filing (FY 2026–27)
- CMP-02
- CSR-2
- Tax-saving investments
Contact – Fair Tax
📍 Hyderabad | Zaheerabad | Nagarkurnool
📞 8309434658
📧 fairtaxz@gmail.com
🌐 www.fairtaxs.in
Disclaimer
This article is for informational purposes only and is based on Budget proposals, notifications, and advisories available as of February 2026.
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