Income Tax Act 2025: The Income Tax Act of 2025 is set to take effect in India on April 1, 2026. This legislation will introduce major changes to tax regulations, affecting individuals, investors, and businesses. These updates were revealed by Finance Minister Nirmala Sitharaman during the Union Budget 2026 presentation. The aim of the government is to streamline the tax system. Let’s take a closer look at the upcoming changes.
Changes in taxation on share buybacks
Up until now, when a company repurchased its shares, the funds received by investors were classified as a “deemed dividend” and taxed according to the standard income tax brackets. Starting April 1, 2026, this amount will be treated as a capital gain. Consequently, it will be taxed similarly to the sale of shares, depending on whether it is classified as a short-term or long-term capital gain.
Increased costs for futures trading
The Securities Transaction Tax (STT) on futures transactions has been raised from 0.02% to 0.05%. This new regulation will be applicable to derivative contracts entered into after April 1, 2026, directly affecting F&O traders. Sovereign Gold Bonds will no longer be entirely tax-exempt. If you acquired SGBs through the initial government offering, redemption remains tax-free. However, if you bought SGBs from the secondary market, you will face capital gains tax upon maturity. Previously, these bonds were entirely tax-exempt.
If you financed your investments in stocks or mutual funds through a loan, you can no longer deduct interest expenses from your dividend or mutual fund income for tax purposes. Now, the full income will be taxable, even if the investment was made using borrowed funds.
A single declaration is now sufficient. In the past, investors had to submit separate forms for various mutual funds, dividends, and bonds to prevent TDS deductions. Now, a single declaration can be submitted to the depository, covering all investments. This change will help reduce paperwork. Employers can now also benefit from tax deductions if they deposit their Employees’ Provident Fund and Employees’ State Insurance contributions by the deadline for filing their income tax returns. Previously, there were strict deadlines for this.
Purchasing property from an NRI is now easier. If you buy property from an NRI, you won’t need to get a TAN to deduct TDS anymore. You can simply use your PAN for TDS deductions. This change will make property transactions more straightforward. The TCS on overseas tour packages has been reduced to a flat rate of 2%, down from 5% or 20%. Additionally, TCS on remittances for education or medical expenses abroad under the LRS has also dropped from 5% to 2%. This adjustment will benefit students and patients traveling overseas.
MAT will now serve as the final tax
Previously, companies could pay MAT (Minimum Alternate Tax) and later adjust its credit. Starting April 1, 2026, MAT will be set at 14% and will be the final tax, meaning MAT credit will no longer be applicable. However, any MAT credit accrued until March 31, 2026, can still be utilized.
Tax exemption for disability pensions of army personnel
If an armed forces member retires due to a service-related disability, their disability pension will now be entirely tax-exempt, covering both the service and disability portions. According to the RFCTLARR Act (Land Acquisition, Rehabilitation and Resettlement Act), when the government acquires land and compensates the owner, that compensation will not be taxed (except under Section 46). This rule will take effect for transactions after April 1, 2026, providing clarity for farmers and landowners and removing confusion about taxation.
Change in income tax return filing deadline
For non-audited businesses and trusts, the new deadline for filing income tax returns is now August 31st, instead of July 31st. However, salaried individuals will still need to file by July 31st. The interest earned on compensation from the Motor Accident Claims Tribunal will now be exempt from tax. Additionally, this interest will not be subject to tax deduction at source, ensuring that victims or their families receive the full compensation amount.
Sweta Mitra
Working in the media for last 7 years. The journey started in the year 2018. For the past few years, my working experience has been in Bengali media. Currently working at Timesbull.com. Here I write like Business, National, and Utility News. My favorite hobbies are listening to music, traveling, food,...
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