New Delhi, Mar 31: A host of tax reforms, including the rollout of the New Income Tax Act 2025 and an increase in Securities Transaction Tax (STT) on futures and options (F&O) trades, will come into force from April 1, marking the beginning of the 2026-27 financial year.
The new legislation will replace the decades-old Income-tax Act, 1961, with an aim to simplify and modernise the tax structure. The revamped law introduces a streamlined “tax year” system, eliminating the distinction between assessment year and previous year, making compliance easier and more transparent for taxpayers.
During the transition phase, the Income Tax Department will support both the old and new systems through its e-filing portal. Returns for the assessment year 2026-27, relating to income earned under the old law, will continue to be filed using existing forms, while advance tax payments from June 2026 onwards will follow the provisions of the new Act.
A key feature of the reform is flexibility for taxpayers, allowing claims of TDS refunds even if income tax returns are filed after the deadline, without attracting penalties.
In a parallel move, the government has raised the STT on equity derivatives trading to discourage excessive speculation. The tax on futures contracts will increase from 0.02 per cent to 0.05 per cent, while options trading will also see higher rates on premiums and exercise. The measure is aimed at protecting retail investors, as data has shown significant losses in the derivatives segment in recent years.
To provide relief to the middle class, the government has reduced Tax Collected at Source (TCS) on overseas tour packages to 2 per cent from 20 per cent. Similarly, remittances under the Liberalised Remittance Scheme (LRS) for education and medical purposes will now attract a lower TCS of 2 per cent, down from 5 per cent.
The Budget also introduces a major boost for the digital infrastructure sector. Foreign companies availing data centre services in India will be eligible for a 20-year tax holiday until 2047, addressing concerns over taxation of global income and encouraging investment in the country’s data ecosystem.
Additionally, the threshold for safe harbour provisions for IT and IT-enabled services firms has been significantly increased from Rs 300 crore to Rs 2,000 crore. This move is expected to reduce disputes and provide greater certainty to the industry.
Overall, the new tax regime seeks to balance simplification, investor protection, and economic growth as India enters a new fiscal year.