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India’s Union Budget 2026 introduces a new Income-tax Act effective April 1, 2026, replacing the 1961 law. The reforms simplify filing, reduce litigation, and ease compliance with smart forms and rationalized penalties. While minor defaults are decriminalized, strict provisions remain for wilful evasion, ensuring simplicity doesn’t compromise enforcement.
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Effective Date & New Framework
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The Income-tax Act, 2025 will replace the old 1961 law from April 1, 2026.
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Draft rules have been released for public feedback until February 22, 2026.
Simplification & Ease of Compliance
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Introduction of standardized, smart ITR forms with prefill and reconciliation features.
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Staggered filing deadlines to reduce last-minute rush.
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Automated systems for lower or nil TDS certificates.
Rationalized Penalties & Prosecution
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Minor defaults decriminalized to reduce harassment of small taxpayers.
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Graded punishments replace blanket jail terms, ensuring proportionality.
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Integrated assessment-penalty orders streamline enforcement.
Reliefs & Clarifications
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Lower TCS on overseas tour packages, education, and medical remittances.
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PAN-based TDS for non-resident property sales.
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Extended timelines for revised and updated returns.
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One-time foreign asset disclosure scheme for settlement with immunity in small cases.
Safeguards Against Evasion
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Serious offences like wilful tax evasion remain criminally prosecutable.
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Clearer definitions of evasion ensure loopholes are minimized.
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Government emphasizes that simplification is not a free pass for evaders.
Sources: The Financial Express, Tax Guru, The Economic Times
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