Finance Minister Nirmala Sitharaman presented the Union Budget 2026 on February 1 and announced significant changes to the tax system. The government introduced the ‘Income Tax Act, 2025’, which will replace the old laws starting from April 1, 2026. Along with this, the deadline to correct mistakes in tax returns has been extended to give more time to common people.
New Income Tax Act and Simplified Rules
The new Income Tax Act, 2025 is set to replace the 64-year-old Income Tax Act of 1961. The main goal of this change is to make tax laws easier to understand for everyone. The government plans to reduce the number of provisions and sections by almost 50% to cut down on complexities.
A major change in the new act is the removal of confusing terms like ‘Assessment Year’ and ‘Previous Year’. From now on, a single term ‘Tax Year’ will be used to avoid confusion among taxpayers. This new act will officially come into effect from April 1, 2026.
Changes in ITR Deadlines and Tax Benefits
The budget has offered relief regarding the filing of updated returns. The deadline for filing Revised and Belated Income Tax Returns has been shifted from December 31 to March 31 of the relevant year. This extension allows taxpayers three extra months to fix errors or add missing information by paying a nominal fee.
Key Announcements from Budget 2026:
- Tax Free Income: Under the New Tax Regime, income up to ₹12 lakh is now tax-free as the rebate under Section 87A has increased to ₹60,000.
- TCS Reduced: The Tax Collected at Source (TCS) on foreign tour packages has been reduced from the earlier range of 5-20% to just 2%.
- Filing Dates: The deadline for salaried employees (ITR-1 & 2) remains July 31. For non-audit businesses, the proposed date is August 31.
- Penalty: Hiding income or giving false information will now attract a penalty equal to 100% of the tax amount.
