Finance Minister Nirmala Sitharaman, during her Budget 2026 speech, proposed a six-month foreign asset disclosure scheme, which is targeted towards small taxpayers such as students, technology professionals and relocated non-resident Indians (NRIs).

As per the announcement, the move is to position small taxpayers to obtain lower or nil tax deduction certificates without the need for discretionary approvals from tax officials, marking a shift towards greater automation and predictability in tax administration.

Union Finance Minister Nirmala Sitharaman on Sunday, 1 February 2026, did not announce any new change in the tax slabs under the old or new income tax regime, bringing forth an underwhelming response from people who were expecting any form of tax relief in the rates.

Check out the tax slabs under the old tax regime —

• For income up to ₹2,50,000 — Nil
• For income of ₹2,50,001 to ₹5,00,000 — 5%
• For income of ₹5,00,001 to ₹10,00,000 — 20%
• For income above ₹10,00,000 — 30%

Under the new tax regime, the tax liability rates are as follows —

• For income of up to ₹4 lakh — Nil
• For income of ₹4 lakh to ₹8 lakh — 5%
• For income of ₹8 lakh to ₹12 lakh — 10%
• For income of ₹12 lakh to ₹16 lakh — 15%
• For income of ₹16 lakh to ₹20 lakh — 20%
• For income of ₹20 lakh to ₹24 lakh — 25%
• For income above ₹24 lakh — 30%

Finance Minister Nirmala Sitharaman on Monday, 2 February 2026, told the news agency PTI that the increase in the Security Transaction Tax (STT) is a sort of deterrence so that people do not go headlong in speculative derivative trading.

Union Budget proposed cuts on the TCS rate on travel, which is set to benefit the travellers as they will not have to pay a higher amount upfront. The 2% TCS cut is beneficial when a large amount of payment is involved.

"With this, the lower amount stands to get blocked for the taxpayers. This move will be beneficial not only for the taxpayers but also for the income tax department," said CA Chirag Chauhan, founder of Mumbai-based CA Chauhan & Company.

FM Nirmala Sitharaman, in her Budget 2026 speech, proposed that the proceeds which an investor earns from the buyback of shares will also be subject to a capital gains tax.

The existing rules suggest that the proceeds gained from a buyback move are treated as a dividend and taxed based on the investor's income tax slab rate.

However, this new norm will change that increasing a tax liability of an investor participating in a buyback offer.

Union Finance Minister Nirmala Sitharaman said that the government is set to notify the people about the new taxation rules under the Income Tax Act, 2025, which is set to be effective 1 April 2026.

However, it was also mentioned that there are no changes to income tax rates, the standard deduction, or tax slabs under the new tax regime.

Union Finance Minister Nirmala Sitharaman in her Budget 2026 speech proposed that the taxpayers will now be able to file their income tax returns (ITRs) till 31 March of the relevant assessment year, compared to its 31 December deadline as per the current norms.

Finance Minister Nirmala Sitharaman proposed to increase the Security Transaction Tax (STT) for F&O trading in an effort to encourage long-term investment in the economy.

"Further clarity through higher STT on futures and options aims to encourage longer-term investing, while higher NRI investment limits from 5% to 10% per stock and 24% at the overall level are intended to attract greater NRI participation," says Srikanth Subramanian, co-founder and CEO of Ionic Wealth.

The Indian government's Budget proposal to increase the Security Transaction Tax (STT) means that the investors who are trading or looking to trade in the futures & options (F&O) derivatives market will have to pay more tax to the government per transaction.

FM Nirmala Sitharaman in the Union Budget 2026 announced that STT on futures will be hiked to 0.05% from 0.02% existing levels, and STT on options trading will be increased to 0.15% from 0.1% level.

STT is a direct tax which the government imposes on every purchase and sale of securities like equity shares, futures, and options on recognised stock exchanges.

Giving the government's rationale behind the STT increase, the tax department said that the total volume of transaction in the F&O segment is a massive 500 times of the Indian GDP, which stands at ₹300 lakh crore.

Issuing a clarification, the income tax department said STT has been raised only on options and futures, and not other segments.

The FM proposed to stagger the timeline for filing of tax returns. Individuals with ITR 1 and ITR 2 returns will continue to file till 31 July, and non-audit business cases or trusts will be allowed time till 31 August.

The Budget also proposed to extend the existing framework for immunity from penalty and prosecution in cases of underreporting to misreporting.

However, in such a case, the taxpayer will need to pay 100 per cent of the tax amount as an additional income tax over and above the tax and interest due.

Budget 2026 also makes a proposal for a scheme for small taxpayers wherein a rule-based automated process will enable obtaining a lower or nil deduction certificate instead of filing an application with the assessing officer.

Emphasising the need to support critical infrastructure and boost investment in data centres, the FM proposes to provide a "tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India.

"It will, however, need to provide services to Indian customers through an Indian reseller entity," the FM added.

The Budget extended the time limit for filing returns by businesses or trusts that do not need to get their accounts audited by one month till August 31. However, individuals will continue to file ITR by July 31.

Although no change in income tax rates and slabs was announced in the 2026-27 Budget, Sitharaman proposed an amnesty scheme under which small taxpayers, like students and tech professionals, can declare undisclosed foreign income and assets by paying additional tax and fees, to skip prosecution.

The STT rate for futures now is 0.05% and for options is 0.15%. In her speech, FM Sitharaman said, "I propose to raise the STT on Futures to 0.05% from present 0.02% options premium and exercise of options are both proposed to be raised to 0.15% from the present rate of 0.1% and 0.125% respectively."

The FM proposed raising the Securities Transaction Tax (STT) on both futures and options. For futures, she proposed raising the tax rate from 0.02% to 0.05%; for options, from 0.01% to 0.15%.

A New Income Tax Act will come into effect from 1 April, replacing the six-decade-old tax law.

Sitharaman said in her Budget speech, "This (direct tax code) was completed in record time, and the Income Tax Act 2025 will come into effect from 1 April 2026. The simplified income tax rules and forms will be notified shortly, giving adequate time to taxpayers to acquaint themselves with their requirements."

No new changes in income tax slabs were announced in Budget 2026. FM Nirmala Sitharaman also did not announce any income tax rate cuts.

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