New income tax comes into effect from April 1, revised ITR due by March 31; 100% penalty for income misreporting

 

FM Nirmala Sitharaman budget speech: Finance Minister Nirmala Sitharaman announced a new Income Tax Act in Budget 2026-27, which will come into effect on April 1, 2026. It will replace the old 1961 Act. The deadline for revising ITR has been extended to March 31, while the Tax Return (TCS) on overseas tour packages has been reduced to 2%. Income misreporting will now attract a 100% penalty. These changes aim to simplify and make the tax system transparent.

Finance Minister Nirmala Sitharaman made several major income tax-related announcements in Budget 2026-27, which will bring relief and ease to the common man and taxpayers. The most significant change is that the new Income Tax Act will come into effect on April 1, 2026. It will replace the Income Tax Act 1961, which was outdated and complex. New rules and forms will be notified soon, giving taxpayers time to prepare.

Key changes related to the new Income Tax Act

  • The deadline for revising ITR has been extended to March 31, however, a small penalty fee will be charged.
  • The deadline for filing ITR-1 and ITR-2 remains unchanged at July 31.
  • The TCS rate on overseas tour packages has been reduced to just 2% (from 5% to 20%).
  • A six-month Foreign Asset Disclosure Scheme will be introduced for small taxpayers, providing an opportunity to disclose their foreign assets.
  • TDS will be levied on property sales by non-residents.
  • The penalty for income misreporting will now be 100% of the tax amount, increasing the severity.
  • Simplified income tax rules will be notified soon.

Fiscal deficit also in focus

The fiscal deficit is projected to be 4.3% of GDP in FY27, which is better than before. The debt-to-GDP ratio will improve to 55.6% in FY27 (from 56.1% in FY26). The fiscal deficit for FY26 will be 4.4%. Gross market borrowing is estimated at ₹17.2 lakh crore and net borrowing at ₹11.7 lakh crore.

Net tax receipts are expected to be ₹28.75 lakh crore in FY27. These changes are aimed at making the tax system simpler, transparent, and compliance-friendly. The new tax act will eliminate old complexities, simplify ITR filing, and provide greater relief for minor errors. This budget will prove helpful for the middle class and salaried individuals in tax management.

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