New Delhi: The Union Budget 2026-27 unveiled a broad set of direct tax reforms aimed at improving “ease of living” for taxpayers, including exempting interest awarded by Motor Accident Claims Tribunals (MACT) from income tax, cutting tax collected at source (TCS) on overseas remittances, and simplifying compliance through rule-based, automated processes.
Announcing the measures in Parliament, Finance Minister Nirmala Sitharaman said the proposals are intended to reduce friction, improve clarity and move the tax administration towards a more trust-based, technology-driven framework.
Under the proposals, any interest awarded by MACT to a natural person will be fully exempt from tax and no TDS will be deducted on such payments.
The Budget also proposes to reduce TCS on overseas tour packages to 2%, and similarly bring down TCS to 2% for education and medical remittances under the Liberalised Remittance Scheme.
To remove ambiguity, supply of manpower services will be explicitly included under payments to contractors for TDS purposes, attracting a 1% or 2% deduction rate.
For small taxpayers, the government will roll out a scheme to obtain lower or nil TDS certificates through a rule-based automated process, doing away with the need to approach assessing officers. To ease compliance for investors holding securities across multiple companies, depositories will be allowed to collect Form 15G/15H and transmit it to the relevant firms.
The Budget also extends the deadline for revising income tax returns to March 31 from December 31, subject to payment of a nominal fee, and proposes to stagger filing timelines across categories, with ITR-1 and ITR-2 filers continuing to have time till July 31 and non-audit business cases and trusts till August 31.
In a significant one-time relief, the Budget proposes a six-month foreign asset disclosure scheme for small taxpayers such as students, young professionals and relocated NRIs.
For those who failed to disclose overseas income or assets up to ₹1 crore, the scheme offers immunity from prosecution on payment of tax and an additional levy in lieu of penalty, while those who disclosed income but missed declaring assets up to ₹5 crore can secure immunity from both penalty and prosecution on payment of a ₹1 lakh fee.