What changes for taxpayers in Budget 2026? 10 major tax changes explained

Key tax rule changes this year cover derivatives, buybacks, revised ITR timelines and crypto reporting penalties

The Union Budget 2026 has left income tax slabs unchanged, but it has introduced several targeted compliance, trading and penalty-related changes that can affect taxpayers and investors. From derivatives trading costs to revised return deadlines and crypto reporting penalties, the proposals reshape parts of the tax framework without altering headline rates. Below is an explainer of key changes.

No change in income tax slabs

 

The government has not altered personal income tax slabs or rates this year. For salaried and individual taxpayers, the core tax outgo structure remains the same. However, multiple rule-level changes may still influence how income is reported and taxed.

Higher STT on F&O trades from April

 

The Budget has proposed higher Securities Transaction Tax (STT) on derivatives trades:

• STT on exercised stock options will rise to 0.15 per cent from 0.125 per cent, calculated on the intrinsic value (It represents what an investment is actually worth rather than what people are currently paying for it). 
• STT on futures trades will increase to 0.05 per cent from 0.02 per cent, calculated on traded price.
• These revised rates will apply to transactions entered on or after April 1.

Active F&O traders may see a marginal rise in transaction costs.

 

Buybacks to be taxed as capital gains

 

Share buyback proceeds will now be treated as capital gains instead of dividend income for investors.

• A higher 30 per cent capital gains tax rate is proposed for non-corporate promoters
• Corporate promoters will face a lower effective rate of about 22 per cent

The move aims to prevent promoters from using buybacks as a primary profit extraction route.

Relief on motor accident compensation interest

 

Interest received on compensation awarded by Motor Accidents Claims Tribunals will become fully tax-exempt from April 1. This exemption will apply to victims or their legal heirs in cases involving death or injury.

More time to file revised returns

 

Taxpayers will get a longer window to correct mistakes in filed returns

• Deadline for revised returns proposed to move to March 31 from December 31
• This gives additional time to fix reporting errors or omissions 

New Income Tax Act rollout

 

The new Income Tax Act is scheduled to take effect from April 1. The government has indicated that simplified rules and forms will be notified separately.

 

Lower maximum jail terms for offences

 

The Budget proposes lighter maximum punishment for certain tax offences:

• General offences: Maximum jail term reduced to 2 years
• Repeat offences: Maximum term reduced to 3 years
• Non-payment of TDS/TCS: Maximum jail term capped at 2 years, with fine as minimum penalty

Crypto reporting penalties tightened

Specific penalties have been proposed for crypto transaction reporting failures:

• Rs 200 per day for non-furnishing of required statements
• Rs 50,000 penalty for inaccurate reporting or failure to correct details

Immunity route for underreporting cases

 

A provision allows taxpayers to seek immunity from penalty and prosecution in underreporting cases if tax and interest are paid on time and no appeal is filed against the assessment order.

 

Overall, while slab rates stay unchanged, compliance rules and transaction taxes see meaningful adjustments that taxpayers and market participants should track closely.