Budget 2026 | Direct Tax Proposals: Key Changes to Ease Compliance and Simplify Processes

Hyderabad, February 1, 2026 – In the Union Budget 2026-27 presented by Finance Minister Nirmala Sitharaman today, the government focused on taxpayer-friendly measures in the direct tax domain. With no changes to income tax slabs or rates, the emphasis was on reducing compliance burdens, extending timelines, and streamlining procedures ahead of the new Income Tax Act, 2025, coming into effect from April 1, 2026.

Here are the major direct tax proposals announced:

• Extended Time for Revising ITRs Taxpayers now get more flexibility to revise their Income Tax Returns (ITRs). The deadline for filing revised returns has been extended from December 31 to March 31, subject to payment of a nominal fee. This provides additional time for corrections without heavy penalties.
• ITR Filing Deadlines Retained and Staggered The filing deadline for ITR-1 (Sahaj) and ITR-2 remains July 31, ensuring continuity for most individual taxpayers. For non-audit businesses and trusts, the deadline has been extended to August 31, offering staggered timelines to ease the filing process.
• Simplified TDS on NRI Property Sales A significant relief for Non-Resident Indians (NRIs) and resident buyers: TDS on the sale of immovable property by an NRI will now be deducted and deposited by the resident buyer using their PAN. This eliminates the previous requirement for the buyer to obtain a TAN (Tax Deduction Account Number), simplifying transactions and reducing paperwork.
• Tax Exemption on Motor Accident Tribunal Interest Any interest awarded by the Motor Accident Claims Tribunal to a natural person will be fully exempt from income tax. Additionally, no TDS will apply on such interest payments, providing relief to accident victims and their families.
• Updated Returns Allowed Post-Reassessment To encourage voluntary compliance and reduce litigation, taxpayers can now file updated returns even after reassessment proceedings have been initiated. This is permitted by paying an additional 10% tax over the applicable rate for the relevant year.

These proposals aim to make the tax system more efficient, reduce friction for small taxpayers and NRIs, and align with the upcoming simplified Income Tax Act. Experts view them as steps toward better ease of living and compliance, building on last year’s major tax relief measures.

The new rules and ITR forms under the Income Tax Act, 2025, will be notified shortly, giving taxpayers ample time to adapt.

Stay tuned to BharatTone.com for more updates on Budget 2026 and its impact on taxpayers.