Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on February 1, marking her 9th consecutive budget. The government has taken a strict stance against tax evasion and introduced tough measures for those who hide their actual earnings. Along with strict penalties, the budget also offered some relief regarding Tax Collected at Source (TCS) for international travelers.
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New Penalty Rules for Income Tax
The government has made significant changes to the rules regarding income reporting. If a taxpayer is found misreporting or hiding their income, they will face a heavy penalty. The new rule states that a penalty of up to 100 percent of the tax amount will be levied on such individuals. This move aims to ensure that everyone discloses their financial status honestly.
Apart from income, the non-disclosure of non-immovable assets is now also under the penalty scope. Earlier, this specific category was not strictly penalized, but now the Income Tax Department will monitor these assets closely. The use of digital data matching makes it difficult to hide any financial details now.
Key Updates on ITR and TCS Rates
There is good news for people planning foreign trips. The TCS rate on foreign tour packages has been reduced to just 2 percent. Previously, this rate ranged between 5 to 20 percent depending on various factors. For the IT sector, the safe harbour margin has been fixed at 15.5 percent.
The timeline for correcting mistakes in tax returns has also changed. Taxpayers can now file a ‘Revised Return’ until March 31 with a nominal fee. However, the deadline for filing the regular ITR-1 and ITR-2 remains July 31.
Quick Look at Budget 2026 Changes:
| Category | New Rule/Rate |
| Misreporting Penalty | 100% of Tax Amount |
| Foreign Tour TCS | Reduced to 2% |
| Revised Return Date | Extended to March 31 |
| Safe Harbour Margin | 15.5% (Limit ₹2,000 Cr) |
