Major Income Tax Rule Changes from April 1: Impact on Salary, Investment and TDS Explained

Income Tax Rules: The new financial year 2026-27 is set to begin on April 1, 2026, marking the implementation of the ‘Income Tax Act 2025’. This transition brings significant changes to income tax regulations, investments, TDS/TCS, and corporate compliance. These modifications will impact a wide range of taxpayers, from salaried individuals to business owners and stock market investors. Here is a comprehensive breakdown of how these changes will affect your finances.

Changes for Investors and Stock Market

The new tax regime introduces major shifts in how investment income is taxed, particularly regarding share buybacks and securities transaction taxes.

• Share Buybacks: Previously, income from share buybacks was treated as dividends and taxed according to the individual’s income slab. Effective April 1, 2026, buyback profits will be classified as ‘Capital Gains’. Tax will be calculated based on the purchase price and the holding period, similar to standard stock trading.
• Increased STT: The Securities Transaction Tax (STT) on futures trading has been hiked from 0.02% to 0.05%. Options traders will also face higher costs, with a proposed increase in STT on options premiums from 0.10% to 0.15%.
• Mutual Funds & Dividends: Under the new rules, investors can no longer claim deductions for interest expenses incurred on borrowed funds used to invest in mutual funds or earn dividend income.

Gold Bonds and Property Transactions

Rules regarding Sovereign Gold Bonds (SGBs) and property purchases from Non-Resident Indians (NRIs) have been updated.

• SGB Tax Rules: Tax exemptions on Sovereign Gold Bonds will now be exclusive to bonds purchased directly from the government. SGBs bought from the secondary market will attract capital gains tax upon redemption. Investors must hold the bonds until maturity to avail of tax-free returns.
• Property from NRIs: Buying property from an NRI has become simpler. Buyers will no longer require a Tax Deduction and Collection Account Number (TAN) to deduct TDS. The process can now be completed using just the buyer’s PAN, easing cross-border property transactions.

Relief on Foreign Expenses (TCS)

In a move to reduce the burden on foreign travel and education, the Tax Collected at Source (TCS) rates under the Liberalized Remittance Scheme (LRS) have been slashed.

• TCS on foreign tour packages, as well as foreign education and medical expenses, has been reduced from 5% to 2%. This will lower the upfront costs for students studying abroad and international travelers.

ITR Filing and Compliance Simplified

To ease the compliance burden, the government has streamlined TDS declarations and extended filing deadlines for certain categories.

• Single Declaration: Investors can now submit a single declaration to avoid TDS on various income sources like mutual funds, dividends, and bonds, eliminating the need for multiple forms.
• Extended Deadlines: For unaudited businesses and trusts, the ITR filing deadline has been extended from July 31st to August 31st. Additionally, the window for filing revised returns has been extended to March 31st from December 31st. However, for salaried individuals, the deadline remains July 31st.
• Tax-Free Compensation: Interest on compensation awarded by the Motor Accident Claims Tribunal (MACT) is now completely tax-free. Furthermore, disability pensions for armed forces personnel injured on duty have been exempted from tax.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult with a qualified tax advisor or chartered accountant before making any financial decisions or tax filings.