COURTKUTCHERY SPECIAL ON #BUDGET2026 ON TAXPAYERS IMPACT
Budget 2026: New Income Tax Act Brings Major Changes in Deductions, Exemptions, and Capital Gains Rules for Taxpayers
Simplified Tax Compliance and Relief Measures Aim to Benefit Salaried Class and Small Taxpayers
Capital Gains Rules Reorganized; New Framework to Replace 1961 Act from April 2026
By Our Business Reporter
New Delhi: February 01, 2026:
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, marks a historic shift in India’s tax landscape. With the introduction of the Income Tax Act, 2025, effective from April 1, 2026, the government has replaced the old 1961 law. This change is not just a legal update but a complete restructuring of how deductions, exemptions, and capital gains are handled. The move is aimed at simplifying tax compliance, reducing litigation, and ensuring fairness for taxpayers.
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Key Highlights of Deductions and Exemptions
- Standard Deduction Retained: Salaried employees continue to enjoy the standard deduction, ensuring relief for the middle class.
- Section 87A Rebate Enhanced: The rebate limit under Section 87A has been revised, offering greater relief to individuals with lower taxable income.
- Insurance and Interest Exemptions: Exemptions on insurance interest awards have been introduced, benefiting policyholders.
- Nil Deduction Certificates: Small taxpayers can now obtain nil deduction certificates, reducing unnecessary tax withholding.
- Senior Citizens: While no new exemptions were announced, stability in tax rules ensures predictability for elderly taxpayers.
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Capital Gains Rules Under the New Act
One of the most anticipated changes in Budget 2026 is the reorganization of capital gains taxation.
- Simplified Categories: The new law reduces complexity by streamlining categories of capital assets.
- Holding Period Adjustments: Revised holding periods aim to bring clarity between short-term and long-term gains.
- Uniform Treatment: Certain exemptions have been rationalized to ensure uniformity across asset classes.
Compliance and Filing Changes
- Extended ITR Deadline: Non-audit cases now have until August 31 to file returns, giving taxpayers more time.
- Simplified ITR Forms: Filing has been made easier with redesigned forms, reducing errors and confusion.
- Penalty Rationalization: Penalties for late filing and non-compliance have been streamlined to encourage timely submissions.
Impact on Different Taxpayer Groups
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- Salaried Employees: Relief through standard deduction and rebates.
- Small Taxpayers: Nil deduction certificates and simplified compliance reduce burden.
- Senior Citizens: Stability in tax rules, though no new concessions.
- Investors: Clearer capital gains rules reduce disputes and litigation.
Expert Reactions
Tax experts have welcomed the move, noting that the new Income Tax Act prioritizes simplification over rate changes. While slabs remain unchanged, the focus on compliance and clarity is expected to reduce disputes and improve taxpayer confidence.
Conclusion
The Union Budget 2026 represents a turning point in India’s tax administration. By replacing the outdated 1961 law, the government has signalled its intent to modernize taxation, reduce complexity, and provide relief to taxpayers. While the changes may take time to fully integrate, the emphasis on simplification and fairness is a positive step forward.
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