The Union Budget 2026–27 did not introduce any changes to income tax rates, but announced several targeted measures to ease the compliance burden for individuals and small taxpayers, part of a broader government effort to simplify tax administration and reduce procedural friction.
Income tax (I-T) filing due date was extended for certain category of taxpayers. Taxpayers filing ITR 3 and ITR 4 forms can file their tax returns by August 31 for non-audit business cases and trusts, instead of July 31.
Simpler form 15G, 15H filing
In a move to ease compliance, the Budget proposed that investors holding securities of multiple companies — and earning dividend income or interest income — will now just have to submit form 15G or form 15H to the depository, rather than each of the companies.
Form 15H is required to be submitted by senior citizens seeking exemption on tax deduction at source (TDS) on dividend income. It is a self-declaration form stating that their total income is below the taxable limit and hence TDS can be exempted. Form 15G is required to be submitted by non-senior citizens for the same exemption.
Reduction in TCS
In a move expected to ease the tax burden on people buying foreign tour packages, Budget 2026 has proposed reducing the tax collected at source (TCS) from 5% and 20% to a uniform 2%, irrespective of the amount spent.
Currently, packages up to ₹10 lakh attract 5% TCS and those in excess of ₹10 lakh attract 20%.
The Budget has also proposed lowering the TCS rate on expenses incurred for pursuing education and for medical treatment abroad under the Liberalised remittance scheme (LRS). These categories currently attract a 5% TCS in excess of ₹10 lakh, which is now proposed to be lowered to 2%, easing the upfront tax impact on families funding overseas education or medical care.
However, education expenses financed through loans taken from specified financial institutions remain fully exempt from TCS, continuing an important relief for students relying on formal education loans.
Last year’s Budget provided some relief by raising the threshold for applicability of TCS on LRS transactions to ₹10 lakh from the earlier ₹7 lakh. This threshold continues in this year’s Budget. It should be noted that ₹10 lakh is a cumulative limit applicable to all transactions under LRS, and not an individual limit.
For instance, let’s say in the financial year 2026-27, you bought stocks worth ₹6 lakh in a foreign country. Two months later, you bought a tour package for a foreign holiday for ₹4 lakh. With these two transactions, your ₹10 lakh threshold has been exhausted, so all subsequent foreign payments will attract TCS at the applicable rates.
Since tour packages now attract a uniform 2% rate with no threshold, taxpayers should prioritise all other spends with zero TCS to benefit from the ₹10 lakh limit.
The Budget has retained a higher TCS rate for other foreign remittances that do not qualify for the concessional 2% rate. All such transactions will continue to attract TCS at 20% on amounts exceeding ₹10 lakh.
Updated returns
Taxpayers can file updated tax returns to show additional income even after filing their returns. The facility is available for up to a period of four years from the tax year in which the return was filed for the first time. Updated returns can be filed with additional tax liability of 25%, 50%, 60%, 70% from the first into fourth year, from the year in which the tax return is originally filed. The budget proposed allowing updated returns to be filed even after reassessment proceeding are initiated by the income tax (IT) department. The updation is proposed to be enabled at an additional 10% tax rate over and above the rate applicable for the relevant year.
If the taxpayer files updated return and reports additional income, the penalty shall not be levied on such additional income.
“Earlier, updated returns were only allowed to be filed if there is additional income tax payable by the taxpayer. The Budget now allows filing of updated return if there is reduction in loss filing. So, if the taxpayer has declared loss in a financial year, the taxpayer may file an updated return if required, which reduces the loss amount,” said Prakash Hegde, a Bengaluru-based chartered accountant (CA).
