Accountants, Direct & Indirect Tax Consultants and Financial Auditors

📘 Budget 2026: Income Tax & International Taxation Highlights

1. Structural Reform
   • New Income Tax Act, 2025 to be effective from 01.04.2026 (simplified framework replacing the 1961 Act).
2. Reliefs & Rate Rationalisation
   • No Income Tax on interest awarded by Motor Accident Claims Tribunal (MACT).
   • TCS on Overseas Tour Packages reduced from 5% / 20% to 2%.
   • TCS under LRS (Education / Medical Remittance Abroad) reduced from 5% to 2%.
   • TDS on Supply of Manpower shifted from Section 194J to 194C - rate reduced to 1% / 2%.
   • TCS on Liquor, Scrap, Minerals reduced to 2%.
   • TCS on Tendu Leaves reduced from 5% to 2%.
   • STT Revised:
     • Futures: 0.02% → 0.05%
     • Options: 0.10% / 0.125% → 0.15%
   • Inter Cooperative dividends to be allowed as deductions to the extent dividend distributed.
3. Compliance & Procedural Relaxations
   • Revised Return deadline extended from 31 December to 31 March (with nominal fee).
   • ITR Due Dates: ITR-1 & 2 (31 July), Non-audit business / Trusts (31 August).
   • TDS on Sale of Immovable Property can now be deposited using PAN (TAN not required).
   • Pre-deposit for Appeals reduced from 20% to 10% of disputed tax.
   • Updated Return allowed even after initiation of proceedings with additional 10% tax.
   • Misreporting immunity available upon payment of 100% additional tax.
4. Foreign Assets / Income Disclosure Scheme
   • Category A (Up to ₹1 Crore): 30% tax on FMV of assets / undisclosed income, additional 30% penalty, immunity from prosecution.
   • Category B (Up to ₹5 Crore): 30% tax on FMV of assets / undisclosed income, additional penalty of ₹1 lakh, immunity from prosecution.
5. International Taxation & Safe Harbour Reforms
   • Safe Harbour Rationalisation: For Software Development, ITES, KPO & Contract R&D, margin reduced to 15.5% (earlier 18%-24%) and threshold increased from ₹300 Cr to ₹2,000 Cr.
   • Electronic Manufacturing: Safe Harbour for non-residents for component warehousing in bonded warehouse at 2% of invoice margin.
   • Related Party Indian Reseller Model: Providing CLOUD SERVICES BY US/IND DATA SERVICE CENTRES FROM INDIA. Safe Harbour margin at 15%.
6. Strategic International Incentives
   • Tax holiday till 2047 for foreign companies providing cloud services using Indian data centres, subject to services being provided to Indian customers via Indian reseller entity.
   • Income Tax exemption to Non-Residents providing capital equipment / tools for Toll manufacturing.
   • Exemption from MAT to Non-Residents paying tax under presumptive basis.
7. Buyback Taxation Changes
   • For minority shareholders: Buyback gains taxable under Capital Gains (not IFOS).
   • Additional Buyback Tax: Corporate promoters (22%), Non-corporate promoters (30%).

📗 Corporate Tax Highlights

• MAT rate reduced from 15% to 14%.
• MAT Credit set-off allowed only under New Regime.
• Set-off restricted to ¼ of tax liability under New Regime.
• No further MAT credit accumulation from 01.04.2026.
• Brought-forward MAT credit (up to 30.03.2026) available for limited set-off as above.
• Final tax payable to be MAT where applicable.

📦 Customs Highlights

1. Customs Duty Rationalisation
   • Basic Customs Duty (BCD) on personal imports (Heading 9804) reduced from 20% to 10% (SWS continues).
   • BCD exemption on 17 critical medicines including cancer drugs; expanded coverage for rare disease treatments.
   • Continued/extended duty exemptions on: Inputs for lithium-ion battery manufacturing, Solar glass materials (e.g., sodium antimonate), Inputs for nuclear power projects, and Critical minerals.
   • Sector-specific tariff rationalisation to support electronics, aviation, textiles, and domestic manufacturing ecosystems.
2. Trade Facilitation & Digital Customs Reforms
   • Rollout of a Customs Integrated Digital System within two years for seamless compliance.
   • Multi-agency import approvals to be integrated through a single-window digital clearance system.
   • Introduction of AI-based non-intrusive container scanning at major ports.
   • Auto-clearance for trusted importers for goods requiring no additional compliance.
   • Warehousing regime shifting to a warehouse operator-centric, self-declaration model with electronic tracking.
3. Compliance & Procedural Relief
   • Duty deferral period extended from 15 to 30 days for Authorised Economic Operators (Tier-2 & Tier-3) and eligible manufacturers.
   • Validity of Customs Advance Rulings extended from 3 years to 5 years, enhancing tax certainty.
   • Removal of ₹10 lakh per consignment cap on courier exports, benefiting MSMEs and e-commerce exporters.
   • Extended export timelines for utilisation of duty-free inputs (e.g., textiles, leather, footwear).
4. Export & Sectoral Incentives
   • Fish caught in India's EEZ/high seas by Indian vessels treated as duty-free, with landing abroad considered export.
   • Customs reforms aligned with “Ease of Doing Business”, supply chain efficiency, and export competitiveness.