&imwidth=800&imheight=600&format=webp&quality=medium "Budget 2026: What changes for India's taxpayers, from ITR deadlines to penalties | Key takeaways")
Finance Minister Nirmala Sitharaman on Sunday (Feb 1) used the Union Budget 2026–27 to roll out a wide set of changes aimed at making India’s tax system simpler, more digital, and less intimidating for ordinary taxpayers. The most immediate change is for small taxpayers seeking lower or nil tax deduction certificates. Sitharaman announced that this will now be handled through a fully automated, rule-based system, removing the need to deal with tax officers altogether.
For investors, there is more relief. Depositories will now be allowed to directly collect Form 15G and 15H and forward them to companies, easing compliance for people who hold securities across multiple firms.
Longer window to fix mistakes
Taxpayers will also get more breathing room to revise returns. The deadline for revising ITRs has been extended from December 31 to March 31, with a small fee.
The filing calendar will now be staggered. Individuals filing ITR-1 and ITR-2 will still follow the July 31 deadline, while non-audit businesses and trusts will be allowed to file till August 31.
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Cutting down tax harassment
A major theme of this Budget is reducing litigation. Sitharaman proposed merging assessment and penalty orders into a single decision to avoid multiple proceedings. She also cut the mandatory pre-payment during appeals from 20 per cent to 10 per cent.
Taxpayers will no longer pay interest on penalty amounts while their appeal is pending. "There will be no interest liability on the taxpayer on the penalty amount for the period of appeal before the first appellate authority, irrespective of the outcome of the appeal process," said Sitharaman.
In another big change, taxpayers can now update returns even after reassessment starts, by paying an extra 10 per cent tax. The updated return will become the final basis for proceedings. “As an additional measure for reducing litigation, I propose to allow taxpayers to update their returns even after reassessment proceedings have been initiated and an additional 10% tax rate over and above the rate applicable for the relevant year. The assessing officer will use only this updated return in his proceedings.”
