New Income Tax Law to be implemented from 1st April, 2026: All You Need to Know [Read Finance Bill 2026]

The Union Budget forthe Financial Year 2026-27 was presented by Finance Minister Nirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026).

Among many announcements made during the Union Budget 2026 presentation, FM Nirmala Sitharaman announced that the new act will replace the 6-decade-old tax law, with the reforms announced in the 2026-27 Union Budget incorporated into the fresh legislation.

Its is a landmark reform in indias tax system. This fresh legislation will officially come into force on 1 April 2026. She emphasized that the new act will simplify compliance, with updated rule forms to be notified shortly, also mentioning that it is designed to make compliance easier for ordinary taxpayers.

Nirmal Sithraman proposed

Ease of living measures:

• Compensation awarded by the Motor Accident Claims Tribunal will be exempt from income tax, and no TDS will apply.

Tax Collection at Source (TCS) changes:

• Overseas tour packages: reduced from 5%/20% to 2% flat.
• Education and medical remittances under LRS: reduced from 5% to 2%.

TDS clarifications:

• Manpower supply servicesare explicitly included under contractor payments, taxed at 1% or 2%.

Small taxpayer relief:

• Automated system for lower or nil deduction certificates, avoiding manual applications.

Form 15G/15H process streamlined via repositories for investors.

Return filing timelines:

• Revision deadline extended to 31 March (instead of 31 December).
• ITR-1 and ITR-2: deadline remains 31 July.
• Non-audit business cases/trusts: deadline extended to 31 August.

Also in the Union Budget 2026-27, FM Nirmala Sitharaman says, "I propose a scheme for small taxpayers wherein a rule-based automated process will enable obtaining a lower or nil deduction certificate instead of filing an application with the assessing officer. For the ease of taxpayers holding securities in multiple companies, I propose to enable depositories to accept Form 15G or Form 15H from the investor and provide it directly to various relevant companies."

The new Income Tax Act 2025 represents a modernization of India’s tax laws. FM Nirmala Sitharaman contending that it simplifies compliance, protects minority shareholders, discourages tax avoidance by promoters, and introduces practical relief measures for ordinary taxpayers. This reform is both a structural and symbolic step toward a fairer, more transparent tax regime.

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