New Income Tax Act from April 1: Buyback taxation, remittance rules & more—Here's what every taxpayers should know
Finance Minister Nirmala Sitharaman underlined the commitment of the government to sustaining structural reforms and simplifying the tax system. A series of direct tax changes were announced, with a new Income Tax Act set to reshape compliance and administration from the next financial year.
1. New Income Tax Act to take effect from April 1, 2026
The Income Tax Act, 2025, is set to come into effect from April 1, 2026. The government will notify simplified Income Tax Rules and redesigned forms in due course, giving taxpayers adequate time to familiarise themselves with the new framework. The revamped forms aim to make compliance easier, especially for ordinary citizens.
2. Simplified tax administration and accounting norms
The Finance Minister proposed setting up a joint committee of the Ministry of Corporate Affairs and the Central Board of Direct Taxes to integrate Income Computation and Disclosure Standards (ICDS) into Indian Accounting Standards (IndAS). As a result, separate accounting requirements under ICDS will be eliminated from the tax year 2027–28.
3. Changes to buyback taxation to curb misuse
To prevent misuse of share buybacks by promoters, the Budget proposes taxing buybacks as capital gains for all shareholders. Promoters will face an additional buyback tax, raising the effective tax rate to 22 per cent for corporate promoters and 30 per cent for non-corporate promoters.
4. Rationalisation of TCS and remittance rules
Tax Collected at Source (TCS) rates for sellers of alcoholic liquor, scrap and minerals will be rationalised to 2 per cent, while the rate on tendu leaves will be reduced from 5 per cent to 2 per cent. For remittances under the Liberalised Remittance Scheme exceeding Rs 10 lakh, TCS will be 2 per cent for education and medical treatment, and 20 per cent for other purposes.
5. Higher securities transaction tax and MAT changes
The Budget proposes increasing Securities Transaction Tax on futures to 0.05 per cent from 0.02 per cent, and on options premiums and exercise to 0.15 per cent. To encourage companies to shift to the new corporate tax regime, set-off of brought-forward MAT credit will be allowed only under the new regime. From April 1, 2026, MAT will become a final tax, with the rate reduced to 14 per cent from 15 per cent, while accumulated MAT credit until March 31, 2026, will continue to be available for a limited set-off.
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