Budget 2026 direct tax playbook: no slab cuts, STT on F&O increases, but big rule changes you can’t ignore

Budget 2026 didn’t bring major changes to direct tax slabs, but it laid out a clear roadmap for future reforms. The government has left individual income tax slabs unchanged under both the old and new regimes. But it has quietly rewritten several rules that will impact how you file returns, trade in F&O, taxation on share buybacks, hold Sovereign Gold Bonds, and manage foreign remittances. For retail investors and salaried taxpayers, Union Budget 2026 shifts focus from rate cuts to cleaner compliance, tighten loopholes, and a push toward long-term, tax-efficient investing over speculation.

1. Income tax slabs unchanged, but different filing journey

The big talking point for individuals was the expectation of tax slab relief. That did not happen. 

Under the old regime, the basic exemption limit remains at ₹2.5 lakh, with slabs of 5%, 20% and 30% continuing as before. Under the new regime, the basic exemption limit stays at ₹4 lakh, and the step‑up slab structure from 5% to 30% is unchanged compared to FY 2025‑26. Standard deduction and key exemptions remain where they were and there is no new deduction announced for salaried taxpayers.

New regime & old regime tax slabs 

New Tax Regime 

Standard Deduction (Salaried): ₹75,000
Rebate (Section 87A): Tax-free income up to ₹12 lakh

Old Tax Regime 

Standard Deduction (Salaried): ₹50,000
Rebate (Section 87A): Tax-free income up to ₹5 lakh

The message is clear–prioritise stability and predictability in personal tax rates, while using other levers to improve ease of filing, expand the tax base and curb aggressive tax planning.

2. Income Tax Act 2025: structural overhaul

The most important announcement is the introduction of the Income Tax Act 2025 from 1^st April 2026, which will replace the 1961 law. The new tax code offers simpler language, fewer ambiguities, better alignment with digital administration, and redesigned ITR forms to reduce disputes and litigation. For ordinary taxpayers, this means that while slab rates are the same, the way you disclose income, show capital gains, and claim deductions is likely to become cleaner and standardized.

3. More time, smoother ITRs: compliance reforms

Budget 2026 focuses heavily on reducing friction in compliance rather than granting big tax cuts. Several changes directly benefit salaried individuals, freelancers and small businesses.

• Revised and belated ITR deadlines extended
  The last date to file a revised return or a belated return has been shifted from 31 December to 31 March of the relevant assessment year. This gives taxpayers three additional months to correct mistakes or file delayed returns, with only a nominal fee applying to such filings.
• Staggered ITR due dates
  While ITR‑1 and ITR‑2 continue to have a due date of 31 July, certain business and trust returns (such as ITR & ITR-4 in non‑audit business) are proposed to be due by 31 August, easing the load on both taxpayers and the system in the peak filing season.
• Automated lower / nil TDS certificates
  Today, obtaining a lower or nil TDS certificate often requires a manual application to the Assessing Officer, which adds uncertainty and delays. Union Budget 2026 introduces a rule‑based, automated mechanism for such certificates. It should streamline TDS compliance, especially for taxpayers with predictable income streams and lower effective tax liability.
• NRI property transactions: no TAN needed for buyers
  When a resident buys property from an NRI, they are required to deduct TDS, but currently need to obtain a TAN (Tax Deduction and Collection Account Number) to do so. The Finance Bill 2026 proposes to remove this requirement and allow such TDS payments using PAN, making these deals simpler for genuine buyers.
• MACT interest is fully tax‑free
  From 1^st April 2026, interest on compensation awarded by the Motor Accident Claims Tribunal (MACT) will be fully exempt from income tax, removing an anomaly where only the principal compensation was effectively treated as non‑taxable. This is a significant relief measure for accident victims and their families.

4. F&O, buybacks, SGBs, the market‑facing tax reset

For investors and traders, the most consequential direct tax changes are in the capital markets space.

Higher STT on F&O

Securities Transaction Tax (STT) on derivatives has been increased, directly impacting traders in the futures and options segment.

This will raise transaction costs for high‑frequency F&O traders and short‑term speculators, though long‑term investors in cash equities remain unaffected by these changes. The policy signals that the government want to dis‑incentivise excessive speculative activity.

Buyback taxation: better for minority investors

Union Budget 2026 has also revamped the taxation of share buybacks. Now, buyback proceeds received by shareholders will be treated as capital gains, with long‑term gains taxed at 12.5% and short‑term gains at 20%. For many non‑promoter shareholders, this can mean a lower effective tax burden compared to the earlier framework, where the buyback tax regime was less transparent and potentially higher in certain situations.

Promoter shareholders, however, may face a separate, higher buyback‑related tax, ensuring the main benefit of the change is directed towards ordinary investors rather than control shareholders.

SGBs: tax‑free exit now more restrictive

The Budget also tightens the Sovereign Gold Bond (SGB) regime. The capital gains exemption at maturity will now be available only if:

• You subscribed to the SGBs directly when the RBI issued them, and
• You hold them till final maturity.

Investors who purchase SGBs in the secondary market will not enjoy this tax‑free exit benefit, reducing the appeal of secondary‑market SGB trades purely for tax arbitrage.

5. Relief and regularisation for small taxpayers and NRIs

Budget 2026 includes a set of targeted measures aimed at small taxpayers, NRIs and specific sectors.

• Foreign Asset Disclosure Scheme
  A one‑time six‑month window is being created for a Foreign Asset Disclosure Scheme targeted at students, young professionals, tech employees and NRIs who may have disclosed the income but failed to correctly report small foreign assets. Within defined limits (with coverage up to a specified asset value), such taxpayers can voluntarily declare these assets, pay a small, fixed fee, and get immunity from penalty and prosecution.
• NRI investment limits increased
  For certain instruments, per‑stock NRI investment limits are proposed to be raised from 5% to 10%, and the overall ceiling from 10% to 24%, potentially boosting foreign portfolio flows from Indian diaspora investors.
• EEE instruments stay intact
  Popular tax‑efficient products like PPF, Sukanya Samriddhi, EPF and select ULIPs/ELSS continue to enjoy EEE (Exempt‑Exempt‑Exempt) treatment in old regime. There is no adverse change announced for them. This ensures long‑term retirement and goal‑based investing remains tax‑friendly.

6. TCS on overseas tours and remittances: big cashflow relief

The most visible change for consumers is in Tax Collected at Source (TCS) on overseas tour packages and remittances under the Liberalised Remittance Scheme (LRS).

What changes in TCS

· Overseas tour packages

Earlier, overseas tour packages attracted 5% TCS up to ₹10 lakh and 20% above ₹10 lakh. Now this slab structure is gone, any remittances for tour packages will have a flat 2% TCS. It means you must pay less money upfront when you book a foreign tour package.

· Education and medical remittances under LRS

Earlier, if you remitted more than ₹10 lakh abroad in a year for education or medical treatment, you had to pay 5% TCS on the amount above ₹10 lakh. Now

the threshold stays at ₹10 lakh, but the TCS rate on the amount over this will now be 2%.

· Certain specified goods

TCS is also rationalised to 2% on some specified goods like alcoholic liquor for human consumption, tendu leaves, scrap, and certain minerals, simplifying rate structures.

TCS pre and post-budget snapshot

7. Business, co‑operative and non‑resident tax moves

Beyond individuals and capital markets, there are deeper reforms for businesses, co‑operatives and non‑residents.

• Co‑operatives get deductions for supplying cattle feed and cotton seed produced by members, along with relief on inter‑cooperative dividends and a temporary exemption for dividends of notified national co‑operative federations on investments made up to 31 January 2026.
• IT services see their safe harbour turnover threshold increased from ₹300 crore to ₹2,000 crore, accompanied by automated, rule‑based approvals that can last for five years, and a fast‑track unilateral APA mechanism, all aimed at reducing transfer pricing uncertainty.
• Non‑residents taxed under presumptive schemes get complete MAT exemption, while certain global experts and non‑residents providing capital goods or tooling to toll manufacturers in bonded zones receive a five‑year income tax exemption.

There is also a long‑horizon policy push: foreign companies providing global cloud services using Indian data centres are promised zero tax till 2047, signalling India’s ambition to be a global digital infrastructure hub.