It is rare to listen to a Budget Speech on a Sunday. Also rare that markets are open and by the time I am writing these, markets has lost around 2%, the largest single day fall on a Budget day in the last six years. Set against the backdrop of geopolitical instability, economic volatility and trade tensions, the Union Budget 2026 is being closely watched by various sectors for fresh support and policy relaxations.

The Economic Survey estimated India’s potential growth at around 7 per cent. It also projected that India’s GDP growth in FY27 is likely to remain in the range of 6.8 per cent to 7.2 per cent. This reflects the economy’s medium-term strength supported by reforms and macroeconomic stability.

It is a saying in Hebrew, “if something is moving in the right direction, you just need to take care of the momentum”. Meaning if you try to interfere, the risk is that you might lose what you have! Is the Union Budget 2026 an interference or is it a momentum enhancer? Well, history will debate that.

Although markets are not happy, we feel it is a positive budget given the scenario. We saw new incentives rolled out for sectors like tourism, data centers, pharma & rare earth. Some pain in short-term is worth taking if you can see big upcoming gains.

Let’s decode the budget in detail, particularly in the areas you & me deal with – Investment, Taxation, & NRI related changes.

Investment-Related Changes in Budget 2026

• Securities Transaction Tax (STT) on futures contracts will be increased, announcing that the rate will be raised to 0.05%, marking a change in transaction costs for derivatives market participants. STT on options premium and exercise of options to be raised to 0.15% from the rates of 0.1% and 0.125%, respectively.
• Buybacks of shares to be taxed as capital gains across all shareholder categories. Buybacks were treated as Deemed Dividend earlier, now to be taxed as capital gains. But promoters will pay additional buy back tax, will that encourage the promoters to announce buy-back? No.
• Reduce TCS rate on sale of overseas tour program package from 5% and 20% to 2% without any stipulation of amount.
• Reduce TCS for pursuing education and for medical purposes under the Liberalized Remittance Scheme (LRS) from 5% to 2%.
• Enable depositories to accept Form 15G or Form 15H from taxpayers holding securities in multiple companies. So you do not have to file these forms separately

Taxation Related Changes – Budget 2026

• A new ACT called the Income Tax Act 2025 will replace the old Income-tax Act, 1961. It applies to the whole of India and comes into force from 1 April 2026.

The intention is simpler language, fewer sections, and easier compliance, not higher tax rates.

Income earned during 1-4-2026 to 31-3-2027 will be taxed strictly as per the Income-tax Act, 2025, even though earlier years were governed by the 1961 Act.

The confusing concepts of “Previous Year” and “Assessment Year” are removed.

A single term “Tax Year” is introduced, which normally means 12 months starting from 1 April. You no longer have to remember two different years for income and assessment.

Income is earned, taxed, and referred to in the same Tax Year, making understanding and filing returns easier.

Example: Income earned from 1-4-2026 to 31-3-2027

Tax Year: 2026-27

Return filed for Tax Year 2026-27

(No separate “Assessment Year 2027-28” confusion anymore.)

A Tax Year Can Be Shorter Too. In some cases, a Tax Year may be shorter than 12 months, such as when a new business starts or a new income source begins during the year.

Example: A freelance consultant starts work on 1-10-2026

Tax Year: 1-10-2026 to 31-3-2027 (6 months only)

 Income before 1-10-2026 is not taxed as business income.

Other taxation-related announcements:

• NO changes in personal income tax slab. So, no direct relief for the middle class.
• TR-1 and ITR-2 filing deadline to continue as July 31. Rest (Non-audit business & Trusts) extended to Aug 31.
• Penalty for misreporting income raised to 100% of tax amount. No imprisonment.
• Interest awarded by the motor accident claim tribunal to a natural person will be exempt from Income Tax, and any TDS on this account will be done away with.
• Time available for revising returns extended from 31st December to up to 31st March with the payment of a nominal fee.
• Individuals with ITR 1 and ITR 2 returns will continue to file till 31st July and non-audit business cases or trusts are proposed to be allowed time till 31st August.
• TDS on the sale of immovable property by a non-resident to be deducted and deposited through resident buyer’s PAN instead of TAN.
• Allow taxpayers to update their returns even after reassessment proceedings have been initiated at an additional 10 percent tax rate over and above the rate applicable for the relevant year.
• Immunity from prosecution with retrospective effect from 1.10.2024 for non-disclosure of on non-immovable foreign assets with aggregate value less than ₹ 20 lakh.
• Honest taxpayers willing to settle disputes will now be able close cases by paying an additional amount in lieu of penalty.

NRI Specific Changes – Budget 2026

• Individual Persons Resident Outside India (PROIs) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme (PIS). India opens its stock markets to overseas individuals doubling per-investor limits (10% from 5% earlier) and lifting the overall cap to 24%, signaling a clear push to 𝘄𝗶𝗱𝗲𝗻 𝗳𝗼𝗿𝗲𝗶𝗴𝗻 𝗽𝗮𝗿𝘁𝗶𝗰𝗶𝗽𝗮𝘁𝗶𝗼𝗻 and global capital inflows. Why ?? because FII aren’t coming… we saw lat one year of their withdrawal. This is a move to lure NRIs & off course their money.
• Obtaining a lower or nil deduction certificate through rule-based automated process for small taxpayers.
• Introducing a one-time 6-month foreign asset disclosure scheme below a certain size for small taxpayers. This will apply to small taxpayers, students & NRIs. Disclosure will be made with immunity, but subject to conditions. Disclosure Cost will be

Up to ₹1 Cr – 30% tax + 30% additional tax

Up to ₹5 Cr – ₹1 lakh fixed fee

• Property purchase from NRIs – TDS can be deposited using PAN (no TAN will be required)

The rest of the budget 2026 will follow when we and the media do further analysis.