Budget 2026 Tax Changes To Take Effect From April 1: Revised ITR Timeline, TCS Cuts, Compliance Relief

Budget 2026 has brought about a series of income tax and compliance adjustments for individual and salaried taxpayers, although there have been no changes in the income tax slabs under the new tax system. The Union Budget, announced on February 1, aims at simplifying compliance, making changes in the tax paid at source, and providing specific exemptions, as per the  Budget announcements.

The Finance Ministry has clarified that all announcements made under Budget 2026 will be applicable from April 1, 2026, unless otherwise specified.

Revised Income Tax Return Deadline Extended

Budget 2026 has extended the deadline for filing revised income tax returns. As per Section 263(5) of the Income-tax Act, 2025, taxpayers will now be able to file revised returns up to March 31 of the relevant assessment year. Earlier, the deadline to file a revised return was December 31.

The Budget document states that taxpayers who file revised returns after December 31 will be required to pay a prescribed fee. The provision allows individuals to correct errors or omissions in their original income tax returns within a longer time frame.

Lower TCS On Overseas Tour Packages

The Union Budget reduced the tax collected at the source rate on overseas tour programme packages. According to the Budget provisions, the TCS rate on overseas tour packages has been cut to 2% from the earlier rates of 5% and 20%.

The reduction applies without any monetary threshold, as stated in the Budget documents. The Finance Ministry later clarified that the purpose of this change is to rationalize the rates of TCS applicable to foreign expenditures under existing tax laws.

TCS Rationalized for Educational and Medical Payments

The Budget 2026 has further altered the provisions of TCS on remittances made under the Liberalized Remittance Scheme for educational and medical payments. As per the Budget documents, the TCS rate for such remittances has been reduced to 2% from 5%.

The ₹10 lakh threshold under the Liberalised Remittance Scheme remains unchanged, according to the Finance Ministry. For remittances exceeding ₹10 lakh for purposes other than education and healthcare, including overseas investments and spending, the TCS rate will continue at 20%.

Interest On Motor Accident Compensation Exempt From Tax

The Budget proposed an income tax exemption on interest received on compensation awarded by Motor Accident Claims Tribunals. The exemption applies to interest income awarded under the Motor Vehicles Act, 1988.

The Budget document states that the Income-tax Act Schedule will be amended to provide an exemption to an individual or their legal heir on such interest income. The Finance Ministry confirmed that the amendment is intended to apply from April 1, 2026.

No Interest On Penalty During Appeal Period

Budget 2026 introduced relief for taxpayers facing penalties under the Income-tax Act. According to the Budget provisions, no interest will be charged on the penalty amount for the period during which an appeal is pending before the first appellate authority.

The provision applies irrespective of the final outcome of the appeal, as stated in the Budget document. The Finance Ministry said the measure is aimed at easing the compliance burden during the appellate process.

No Change In Income Tax Slabs

The Budget didn't say anything about changing the income tax brackets or lowering the tax rates even more under the new tax system. The Finance Ministry said again that the 2026 Budget was more about compliance-related reforms and targeted relief measures than broad-based tax cuts.

Official Budget documents say that the changes are meant to make tax processes easier and less burdensome for taxpayers, while keeping the same tax rate structures.

According to the Finance Ministry's notifications and Budget documents, all changes announced in Budget 2026, such as new deadlines for filing returns, changes to the TCS rate, and tax breaks, will go into effect on April 1, 2026.