Knowledge that keeps clients informed without unnecessary noise

Overview

The Finance Bill 2026 introduces key updates for taxpayers for Tax Year 2026–27, while largely retaining existing tax rates and provisions. There is no change in tax rates for Individuals, HUF, AOP, BOI, Co-operative Societies, Firms, Local Authorities or Domestic Companies. The Bill instead focuses on streamlining compliance, rationalising due dates, simplifying filing requirements and rationalising penalties and prosecution.

Business & MAT

• W.e.f. 01–04–2026, employers can claim deductions for employee welfare scheme contributions if paid on or before the return filing due date.
• The due date for non-audit business/profession income (and partners of non-audit firms) is proposed to move to 31st August.
• MAT paid on or after 01–04–2026 is treated as final tax — no MAT credit will be available against it. The MAT rate itself is reduced from 15% to 14% of book profit. Domestic companies under the New Regime may set off MAT credit up to 25% of tax liability; no change for foreign companies.
• On buy-back of shares, non-promoter shareholders will be taxed under ‘Capital Gains’ rather than dividend income. Promoters face an effective tax liability of 30%, and promoter companies 22%.

TDS/TCS Changes

Payees will be able to apply electronically for a lower/nil TDS or TCS deduction certificate. Resident individuals or HUFs will no longer need a TAN to deduct tax on payments to non-resident sellers of immovable property, effective 01–10–2026. A “single window” declaration (Form 15G/15H via NSDL/CDSL) is proposed for investors from 1st April 2027, and “supply of manpower” is proposed to be included within the definition of “Work” for contractor TDS.

Assessment & Penalties

• Power to conduct pre-assessment enquiry and issue notice u/s 148A and 148 will vest only with the jurisdictional Assessing Officer; faceless re-assessment follows once notice is issued.
• An assessment will not be treated as invalid merely for a mistake, defect or omission in quoting the DIN, if referenced by DIN in any manner.
• Prosecution provisions are proposed to be rationalised — rigorous imprisonment converted to simple imprisonment, maximum terms generally reduced from 7 years to 2 years (3 years for repeat offences), with fine-only treatment and full decriminalisation for small/technical defaults.
• Tax on unexplained cash credits, investments and similar additions (sections 102–106 of the new Act, formerly 68–69D) is proposed to be reduced from 60% to 30%, effective from Tax Year 2026–27.
• No prosecution is proposed for non-disclosure of foreign assets (other than immovable property) up to ₹20 lakh, applicable retrospectively from 01–10–2024.
• The Security Transaction Tax (STT) rate on options is proposed to rise from 0.10% to 0.15% (0.125% to 0.15% where exercised), and on futures from 0.02% to 0.05%.

Other Proposals

• The deadline to file a Revised Return is proposed to extend from 9 months to 12 months from the end of the relevant Tax Year, subject to a fee beyond the 9-month mark.
• Updated returns may be filed to reduce previously claimed losses, including after a re-assessment notice under Section 280/148.
• A one-time voluntary disclosure “reset” window is proposed for resident small taxpayers holding undisclosed foreign assets or income, subject to a specified tax/fee, effective from a date to be notified.
• Deduction of interest expenditure (currently up to 20% of income under Section 57) against dividend and mutual fund unit income is proposed to be withdrawn w.e.f. 01–04–2026.
• A tax exemption is proposed for foreign companies earning income in India from procuring specified data-centre services, through Tax Year ending 31st March 2047, to support AI data-centre investment.

Likely Impact

Individual taxpayers see no change in headline rates but should note the extended revised-return window and simplified TAN requirements for property transactions with NRIs. Businesses and promoters involved in share buy-backs, high-value TCS transactions or MAT computations should review the changes above with our team, particularly given the compressed timelines around the 01–04–2026 and 01–10–2026 effective dates.