Tax Reforms

Part B of the Budget speech introduced the Income Tax Act, 2025, replacing the older Income-tax Act, 1961 with effect from 1 April 2026.

The reforms focus on tax simplification, digital compliance, rationalisation of tax rates and customs duty reductions to support investment, trade and economic efficiency.

Reform Area	Details
Income Tax Act, 2025	The new Act replaces the 1961 Income-tax Act and comes into effect from April 1, 2026.
Digital Compliance	Redesigned forms and rule-based automated processes have been introduced for lower TDS certificates.
TDS/TCS Rationalisation	TCS on overseas tour packages has been reduced to 2% from earlier rates of 5%/20%. LRS remittances for education and medical purposes have also been reduced to 2%.
FAST-DIS Scheme	The Foreign Asset Disclosure Scheme (FAST-DIS) provides a 90-day immunity window for disclosure of foreign assets under specified limits.
Corporate Tax	Minimum Alternate Tax (MAT) has been reduced from 15% to 14%.
Securities Transaction Tax	STT on futures has been increased to 0.05% to curb excessive speculation in derivatives markets.
Customs Duty Reforms	Customs duties have been reduced or exempted for critical minerals, medical drugs, electronics components and personal imports.
Fisheries and Handicrafts	Fish catch by Indian vessels in the EEZ or High Seas has been made duty-free, while the Rs. 10 lakh handicraft export value cap has been renewed.
Electronics Imports	Exemptions have been provided on parts used in microwave manufacturing to support electronics production.

PT Facts

Income Tax Act, 2025: Replaces the older Income-tax Act, 1961 and aims to simplify direct tax law.
MAT: Minimum Alternate Tax ensures that companies with book profits pay a minimum amount of tax.
STT: Securities Transaction Tax is levied on transactions in securities such as shares, futures and options.
LRS: Liberalised Remittance Scheme allows resident individuals to remit money abroad within prescribed limits.
EEZ: Exclusive Economic Zone extends up to 200 nautical miles from the baseline of the coast.

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