Union Budget 2026: Union Finance Minister Nirmala Sitharaman on Sunday unveiled a series of taxpayer-friendly measures in the FY27 Budget, announcing a new rule-based, automated scheme aimed at easing compliance for small taxpayers while also reducing tax collection at source (TCS) on key overseas expenditures. The proposals signal the government’s intent to simplify processes, lower procedural friction and provide targeted relief to individuals with modest or complex income profiles.
Presenting the Budget in Parliament, Sitharaman said the new scheme would allow eligible small taxpayers to obtain lower or nil tax deduction certificates without the need for discretionary approvals from tax officials, marking a shift towards greater automation and predictability in tax administration.
Automated system for lower or nil tax deduction
Outlining the proposal, FM Sitharaman said: “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,” said FM Sitharaman.
Expanding on the operational aspects, Sitharaman added: “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 taxpayer 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.”
According to the government, the move is expected to significantly reduce compliance burdens for individuals with lower taxable incomes, while also minimising delays and inconsistencies associated with manual processing.
Foreign asset disclosure scheme for small taxpayers
As part of the broader package, Sitharaman also proposed a six-month foreign asset disclosure scheme targeted at small taxpayers such as students, technology professionals and relocated non-resident Indians (NRIs). The scheme is designed to provide an opportunity for voluntary compliance, with eligible participants able to regularise disclosures and obtain a nil tax certificate where applicable.
The initiative reflects the authorities’ focus on encouraging transparency while offering proportionate relief to individuals whose overseas assets or income may arise from education, employment or relocation rather than deliberate tax avoidance.
TCS rates under LRS sharply reduced
The Budget also proposed significant reductions in tax collection at source under the Liberalised Remittance Scheme (LRS). The TCS rate on remittances for education and medical purposes is set to be reduced from 5 per cent to 2 per cent.
Similarly, the TCS rate on overseas tour programmes and travel packages has been proposed to be cut from the existing 5 per cent or 20 per cent to a uniform 2 per cent.
These measures are expected to ease cash-flow pressures for households and individuals making legitimate overseas payments, while aligning tax policy more closely with essential and consumption-related expenditures.
Extended timelines for revised and original returns
In another compliance-focused reform, the finance minister announced an extension of the timeline for filing revised income-tax returns.
“I propose to extend time available for revising returns from 31st December to up to 31st March with the payment of a nominal fee. I also propose to stagger the timeline for filing of tax returns – individuals with ITR 1 and ITR 2 will continue to file till 31st July and non-audit business cases or trust are proposed to be allowed time till 31st August,” Sitharaman said.
The staggered deadlines are intended to reduce congestion in the tax system and provide taxpayers with greater flexibility, particularly those with simpler income structures.
Context: relief extended after last year’s tax reforms
The FY27 announcements build on the relief provided in the previous Budget. Budget 2025–26 had introduced substantial changes to slab rates under the new tax regime, effectively exempting salaried individuals with taxable incomes of up to ₹12.75 lakh—after accounting for the standard deduction—from paying any income tax.
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