Key Takeaways: Union Budget 2026-27 targets 4.2 to 4.3 percent fiscal deficit with Rs 12.2 lakh crore capex. Key tax proposals include the new Income Tax Act 2025, revised new regime slabs, TDS and TCS rationalisation, MAT cuts and penalty reforms, alongside pushes for agriculture, technology and infrastructure.
Top Highlights of Budget 2026-27:
Macroeconomic Framework
• Fiscal deficit for FY27 set at 4.2% to 4.3% of GDP.
• Real GDP growth projected between 6.8% to 7.2%.
• Total expenditure estimated at Rs 53.5 lakh crore.
• Net tax receipts projected at Rs 28.7 lakh crore.
• Capital expenditure increased to Rs 12.2 lakh crore.
• Public capex pegged at Rs 11 lakh crore.
• Market borrowing estimated at Rs 11.7 lakh crore.
New Income Tax Framework
• Income Tax Act, 1961 to be replaced by Income Tax Act, 2025, effective from 1 April 2026.
• Objective is simpler law, fewer sections, easier interpretation, and reduced litigation.
• Simplified return forms to be notified shortly.
New Tax Slabs (New Regime)
• Rs 0 to Rs 4 lakh: NIL
• Rs 4 to Rs 8 lakh: 5%
• Rs 8 to Rs 12 lakh: 10%
• Rs 12 to Rs 16 lakh: 15%
• Rs 16 to Rs 20 lakh: 20%
• Rs 20 to Rs 24 lakh: 25%
• Above Rs 24 lakh: 30%
• Income up to Rs 12 lakh is exempt effectively tax free after rebate.
• Standard deduction for salaried employees increased to Rs 75,000.
ITR Timeline Rationalisation
• Individuals (ITR 1 and 2): 31 July
• Non-audit cases and Trusts: 31 August
Belated and Revised Returns
• Filing allowed till 31 March of relevant AY with nominal late fee.
Updated Returns
• Allowed even after reassessment.
• Additional tax payable at 10%.
Tax Audit Changes
• Delay in Tax Audit Report will now attract late fees instead of penalty.
• Upload not allowed without payment of late fees.
TDS and TCS Rationalisation
• TCS under LRS reduced to 2% for foreign tours, education, and medical expenses, no threshold limit.
• TDS on rent annual limit increased to Rs 6 lakh.
• TCS threshold on sale of goods raised to Rs 10 lakh.
• Manpower supply brought under Section 194C, TDS clarified at 1% or 2%.
• Property purchase from NRI: PAN-based challan allowed, TAN not required.
• MACT interest to individuals fully exempt, no TDS.
Corporate Tax Changes
• MAT reduced from 15% to 14%.
• MAT credit allowed in new regime up to 25% of tax liability.
• No MAT credit accumulation after 1 April 2026.
• NRIs under presumptive taxation exempt from MAT.
• Buyback: additional tax on promoters, non-corporate promoters taxed at 30%.
Foreign Asset Compliance Relief
One-time 6 month disclosure scheme
Category A
• Undisclosed foreign income/assets up to Rs 1 crore
• Tax 30% + additional 30%
• Immunity from penalty and prosecution
Category B
• Income disclosed but assets not reported
• Asset value up to Rs 5 crore
• One-time fee Rs 1 lakh
• No penalty or prosecution for non-immovable foreign assets below Rs 20 lakh (retrospective).
Penalty and Litigation Reforms
• Single order for assessment and penalty.
• No interest on penalty during appeal.
• Appeal pre-deposit reduced from 20% to 10%.
• Certain penalties converted into fees.
• Minor offences decriminalised.
• Maximum imprisonment reduced to 2 years.
Corporate Mitras Program
• ICAI, ICSI and ICMAI to introduce modular courses to create Corporate Mitras.
• Objective is to support MSMEs in Tier 2 and Tier 3 cities with compliance, GST, income tax, governance, documentation, and advisory.
Agriculture and Rural Economy
• Kisan Credit Card limit increased from Rs 3 lakh to Rs 5 lakh, benefiting 7.7 crore farmers.
• Makhana Board to be set up in Bihar.
• Investment in Western Koshi Canal project.
• Panchayat-level post-harvest storage facilities announced.
Technology, Energy and Manufacturing
• Nuclear Energy Mission with Small Modular Reactors and private participation.
• Customs duty removed on Lithium and Cobalt powder.
• Semiconductor Mission 2.0 announced.
• Biopharma Shakti launched with Rs 10,000 crore outlay.
Railways and Infrastructure
• Seven new high-speed rail corridors.
• Kavach 4.0 anti-collision system across rail network by 2028.
• States to get Rs 1.5 lakh crore as 50-year interest-free loans for infrastructure.
Cooperative Sector Relief
• Deduction extended to cattle feed and cotton seed supplied by members.
• Inter-cooperative dividend deduction allowed.
• Dividend exemption for notified national cooperative federations till 31 Jan 2026.
IT and Transfer Pricing
• IT, ITES, KPO and contract R&D classified under Information Technology Services.
• Uniform safe harbour margin of 15.5%.
• Safe harbour option available for 5 consecutive years.
• APA for IT services targeted within 2 years.
GST Performance (January 2026)
• Gross GST: Rs 1.93 lakh crore (6.2% growth).
• Net GST: Rs 1.70 lakh crore.
• YTD GST: Rs 18.43 lakh crore.
• Domestic GST growth 4.8%.
• Import GST growth 10.1%.
• Compensation cess sharply reduced.
Download Finance Bill, Budget at glance and key to budget below:
key_to_budget_document_2026.pdf
Regards,
KARWA & ASSOCIATES
CA ANSHUL KARWA
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