What changes for taxpayers in Budget 2026? From penalty to STT, 10 things change as income tax slabs remain unchanged

Union Budget 2026: From changes in the Income Tax Act 2025 in connection with interest awarded by the Motor Accidents Claims Tribunals (MACT) to extension in deadline for revised ITR filings, multiple reforms were proposed by Finance Minister Nirmala Sitharaman in the Union Budget 2026.

The finance minister presented the budget on Sunday, 1 February, in Parliament. However, there have been no changes with respect to Income Tax slabs.

Here's a look at the changes proposed in the Budget 2026:

Changes in STT

The rate of Securities Transaction Tax (STT) on the sale of an option in securities where the option is exercised has been increased from 0.125% to 0.15%, and the tax shall be computed on the intrinsic price of the option.

Meanwhile, the rate of STT on the sale of a future in securities has been increased from 0.02% to 0.05%, and the tax shall be computed on the traded price of the future.

When will the new STT rules come into effect?

The revised STT rates on F&O transactions will take effect from 1 April 2026. The new rates will apply to derivatives transactions in securities entered into on or after that date, as per the Income Tax Department.

Stock buyback to be considered as capital gains

During the Budget presentation, the finance minister proposed taxing the proceeds of share buybacks as capital gains. As per the existing rule, which took effect on 1 October 2024, the entire proceeds of a company’s share buyback were treated as dividend and taxed at the investor’s slab rate

The Budget also proposed a special capital-gains tax rate of 30% for non-corporate promoters to prevent them from using buybacks as the primary way of extracting profits. Corporate promoters will pay a 22% effective tax rate.

No income tax on interest from motor accident compensation

Starting 1 April 2026, any interest on compensation awarded by the Motor Accidents Claims Tribunals or MACT to an individual or their legal heirs – whether due to death, permanent disability, or bodily injury – will be entirely exempt from income tax deductions. Earlier, the principal compensation amount was treated as a capital receipt, effectively making the interest earned on it taxable.

Deadline extension for filing of revised returns

Announcing key compliance changes under the Income Tax Act 2025, the finance minister proposed extending the deadline for filing revised income-tax returns to 31 March from 31 December.

New Income Tax Act

Sitharaman also said that the New Income Tax Act would come into effect from 1 April 2026. She had proposed to overhaul the six-decade-old Income Tax Act of 1961 in her budget presentation last year.

Simplified income tax rules and forms will be notified later, the minister added.

Change in maximum punishment

The Union Budget 2026 has proposed cutting down the punishment for any offences under the Income Tax Act 2025 from the current 7 years to 2 years, and the punishment for subsequent offences has been brought down from 7 years to 3 years.

Penalty provision in crypto assets

Section 509 of the new I-T Act deals with “penalty provision for non-furnishing of statement or furnishing inaccurate information in a statement on transaction of crypto assets”.

It proposes a penalty of ₹200/day for non-furnishing of statement, and ₹50,000 penalty for furnishing inaccurate particulars and failure to correct such inaccuracy.

Can you seek immunity from penalty?

Section 440 of the Income-tax Act, 2025 allows an assessee to seek immunity from the imposition of penalty under Section 439 of the Income Tax Act, 2025 and from initiation of prosecution proceedings under Sections 478/479 of the Income Tax Act, 2025 relating to underreporting of income, if specified conditions are met.

Any taxpayer on whose case an assessment or reassessment order has been made under the relevant provisions, and has paid the tax and interest due within the demand period, and has not filed an appeal against that order may apply, as per the Budget FAQs document.

What is the punishment for non-payment of TDS/TCS to govt

The maximum punishment proposed for non-payment of TDS/TCS after amendments shall be 2 years imprisonment, and the minimum punishment shall be a fine.