After presenting the Budget 2026-27 on 1 February 2026, the Finance Ministry has released detailed questions and answers (FAQ) related to Income Tax through the Income Tax Department. These clarifications are part of the Finance Bill 2026 and are quite important, as the new Income Tax Act, 2025 is coming into force from April 1, 2026. In the new financial year, methods related to return filing, income reporting, penalty, prosecution, TDS and tax notices will change to a great extent. There are no changes in personal income tax slabs in the budget, but the focus is on simplifying compliance, reducing disputes and providing relief to taxpayers.
15 major income tax changes in Budget 2026-27
Extension of time limit for filing updated returns
Taxpayers can now file updated returns for up to 48 months (4 years), even if the original return was not filed. Depending on the delay, the additional tax can range from 25% to 70%.
Adjustment of loss in updated return
Incorrectly overstated losses can be reduced in the updated returns, giving taxpayers an opportunity to make corrections.
Updated returns even after re-assessment notice
Even after receiving the re-assessment notice, the updated return can be filed within the stipulated time. In such cases, there will be exemption from penalty on declared income.
ITR filing deadline extended in non-audit cases
The last date for filing ITR for non-audit businesses and trusts has been extended from July 31 to August 31. The deadline for salaried class will remain 31st July only.
Interest on motor accident claim is completely tax-free
Interest received from Motor Accident Claims Tribunal (MACT) has been made completely tax-free. TDS will also not be deducted on this.
No need for TAN when buying property from NRI
Indian buyers purchasing property from non-residents will no longer be required to obtain TAN. TDS will be deducted on the basis of PAN only.
TDS rules clear on manpower supply
Manpower supply has been clearly included in the definition of ‘work’, which will remove confusion regarding TDS rate (1% or 2%).
Easy to get low or no TDS certificate
Small taxpayers will now be able to easily obtain low or zero TDS certificate through online application.
Single declaration on MF, dividend and bond
Investors can now submit a single declaration (like Form 15G/15H) to multiple sources, especially through depositories, for exemption from tax deductions.
Tax relief on undisclosed income
The tax rate on unexplained income has been reduced from 60% to 30%. There will be no penalty for voluntarily declaring income.
Simultaneous order of assessment and penalty
The tax department will now issue assessment and penalty in a single order, making the legal process shorter and faster.
More relief in penalty and prosecution
In case of mis-reporting or other cases, payment of prescribed duty will be exempted from penalty and jail.
Many penalties now converted into fixed fees
In many cases, instead of penalty, a fixed fee will be imposed, in which there will be no option of ‘reasonable cause’.
Decriminalization of income tax offenses
The tax law has been made less stringent. Jail sentences have been reduced and in many cases only fines will be imposed.
Relief on PF and ESI deposits
Now deduction of PF and ESI contribution of employees will be available even if deposited till the last date of ITR filing.
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