Budget 2026 Income Tax update: Budget 2026, presented by Finance Minister Nirmala Sitharaman on 1 February, did not announce any measures to change the income tax slabs or slash income tax further under the new tax regime. However, this year’s Union Budget focuses on targeted changes that will benefit individual and salaried taxpayers.
Rather than extending broad-based tax cuts, Budget 2026 eases compliance requirements, rationalises TCS and offers relief on motor accident compensation, thus benefiting middle-class and salaried taxpayers as a whole.
Here are some Budget tax changes that will bring relief to individual and salaried taxpayers from 1 April.
Revised ITR filing deadline extended
Budget 2026 provides for taxpayers to file their revised ITRs beyond 31 December. Under Section 263(5) of the Income-tax Act, 2025, taxpayers can file revised returns to correct omissions or mistakes in the original ITRs.
This deadline was previously limited to 31 December of the relevant assessment year. From 1 April, taxpayers will be able to file their revised returns till 31 March. However, they will have to pay a nominal fee if they miss the 31 December deadline.
Overseas travel costs less
The Budget has reduced the Tax Collected at Source (TCS) rate on the sale of overseas tour programme packages. The TCS rate on overseas tour packages has been reduced from the current 5% and 20% to 2%. The TCS rate cut has been done without any stipulation of the amount.
As a result, overseas travel through tour packages will reduce upfront costs and simplify travel for tourists.
TCS rationalised on education and healthcare
Budget 2026 also reduced the TCS rate for pursuing education and for medical purposes under the Liberalised Remittance Scheme (LRS).
Under the new rule, the TCS rate for such purposes has been reduced from the current 5% to 2%. However, the ₹10 lakh threshold still remains.
For remittances under LRS for other purposes, including investments, overseas spending and more, the TCS rate remains 20% on amounts above ₹10 lakh.
Interest on motor accident compensation is made tax-free
Finance Minister Nirmala Sitharaman, during her Budget speech, proposed a tax exemption on awards given by the Motor Accident Claims Tribunal.
“In order to alleviate the sufferings of victims of such an accident and their family, which may cause extreme hardship to the aggrieved person and family, it is proposed to amend the said Schedule to provide exemption to an individual or his legal heir, on any income in the nature of interest under the Motor Vehicles Act, 1988,” the Budget document reads.
The Budget document says these changes will come into effect from 1 April.
No interest on income tax penalty during the appeal period
Budget 2026 relaxes compliance norms for taxpayers, noting that there will be no interest liability on the penalty amount during the appeal period before the first appellate authority, irrespective of the outcome.
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