Income Tax Rules Change: Till now, the income from share buyback was considered as dividend, but from April 1, 2026, it will be considered as capital gain and tax will be levied on it.
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Income Tax Rules Change from 1st April: The new financial year 2026-27 begins on April 1, 2026. The Income Tax Act, 2025 will also come into effect from that day. Under this, many rules related to income tax, investment, TDS/TCS, and companies will change. These changes will affect everyone from salaried individuals to investors, business owners, and companies.
New Tax Approach for Share Buybacks
Until now, earnings from share buybacks were considered dividend income and taxed according to the income tax slab. From April 1, 2026, profits from buybacks will be considered capital gains, meaning that, just like stock trading, tax will be calculated based on the purchase price and holding period.
Increase in STT
The Securities Transaction Tax (STT) on securities futures contracts has been increased. Under the new rules, the futures trading STT has been increased from 0.02% to 0.05%. No exemption has been provided to options traders. In the budget, the government proposed increasing the options premium STT from 0.10% to 0.15%.
Dividend and Mutual Fund Income
According to the new rules, there will no longer be any deduction for interest expense on dividend or mutual fund income, even if the investment was made with borrowed funds. Previously, this tax deduction was available. This new rule will also come into effect from April 1, 2026.
New Rules for Sovereign Gold Bonds (SGBs)
Under the new rules, tax exemption on SGBs will now be available only on bonds purchased directly from the government. SGBs purchased from the secondary market will be subject to capital gains tax upon redemption. Investors will have to wait until maturity to avail of tax-free returns.
Relief from Multiple Declarations
Instead of filing multiple forms for different income sources, investors will be able to submit a single declaration to avoid TDS. This means they will no longer have to repeatedly file separate forms to avoid tax deductions. Mutual funds, dividends, and bonds will all be covered under a single declaration. This will simplify paperwork and ease compliance.
Buying property from NRIs has become easier.
Under the new rules, effective April 1, 2026, a TAN will no longer be required to deduct TDS when purchasing property from a Non-Resident Indian (NRI). Buyers will now be able to deduct TDS using only their PAN. Overall, cross-border property transactions will become easier.
Reduction in TCS on Foreign Expenses
TCS on foreign tour packages has been reduced to 2%. TCS on foreign education and medical expenses under the Liberalized Remittance Scheme (LRS) has been reduced from 5% to 2%. This will reduce the cost of travel, education, and medical treatment abroad.
Relief on PF and ESI Employer Contributions
Employers will now continue to receive tax deductions on PF and ESI contributions until the ITR filing deadline. This will reduce financial penalties and compliance risks for employers.
Interest on Motor Accident Compensation Tax-Free
Interest on compensation awarded by the Motor Accident Claims Tribunal (MACT) will now be completely tax-free and no TDS will be deducted. This means that accident victims will receive full compensation without tax deductions.
ITR Filing Deadline Extended
Unaudited businesses and trusts will now be able to file their ITR by August 31st, instead of July 31st. For salaried individuals, the deadline remains July 31st. The deadline for filing revised returns has been extended to March 31st, instead of December 31st.
Disability Pensions for the Armed Forces Completely Tax-Free
All disability pensions paid to armed forces personnel injured in the line of duty will now be completely tax-free.
MAT becomes the final corporate tax
The Minimum Alternate Tax (MAT) for companies will now be 14%. No new MAT credit will be granted. However, existing MAT credit can be used until March 31, 2026.
