Tax Budget Union Budget 2026: Finance Minister Nirmala Sitharaman gave taxpayers a relief on Sunday when she made foreign travel and remitting money for education abroad cheaper.
At the same time, she hiked the tax on futures and option trading to “provide reasonable course correction”.
Sitharaman left the income tax slabs untouched. Similarly, there was no announcement on long-term capital gains (LTCG) tax or any change in the standard deduction under the new tax regime, which was part of a demand from many quarters ahead of the Budget.
LTCG refers to the profit booked by selling a capital asset after holding it for a long time. This includes land and buildings but also financial assets like equity shares and equity mutual funds.
Foreign travel becomes cheaper
Sitharaman reduced the tax collected at source (TCS) rate for overseas tour packages from 5% or 20% to 2% without any amount stipulations. Currently, a TCS of 5% is charged on amounts up to Rs 10 lakh per financial year, while packages over Rs 10 lakh attract a 20% TCS.
Similarly, the FM made changes to TCS for education and medical remittances under the Liberalised Remittance Scheme (LRS). She reduced it from 5% to 2%.
This will help, for example, parents sending education money to their children, who are studying abroad.
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F&O trading now expensive
Sitharaman flagged that the need for “reasonable course correction” while announcing an increase in the Securities Transaction Tax (STT) on Futures and Options trading.
- The FM said that STT on Futures was being raised to 0.05% from present 0.02%. This was to provide “reasonable course correction in F&O segment in the capital market and generate additional revenues for the government”.
- At the same time, STT on “options premium and exercise of options is proposed to be raised to 0.15% from the present rate of 0.1% and 0.125% respectively”.
Tax disclosure burden eased
The government has proposed that small taxpayers can disclose their foreign assets as part of a one-time six-month scheme. Small taxpayers have been defined as students, young professionals, and NRIs. They can disclose overseas assets below specific thresholds (Rs 1 crore or Rs 5 crore) with immunity from prosecution.
This is what FM said:
“To address practical issues of small taxpayers like students, young professionals, tech employees, relocated NRIs, and such others, I propose to introduce a one-time 6-month foreign asset disclosure scheme for these taxpayers to disclose income or assets below a certain size.
112. This scheme would be applicable for two categories of taxpayers namely,
(A) who did not disclose their overseas income or asset and
(B) who disclosed their overseas income and/or paid due tax, but could not declare the asset acquired.”
How foreign asset disclosure works for 2 categories
For category (A), Sitharaman has proposed the limit of undisclosed income/asset to be up to Rs 1 crore. “They need to pay 30 per cent of Fair Market Value of asset or 30 per cent of undisclosed income as tax and 30 percent as additional income tax in lieu of penalty and would thereby get immunity from prosecution.”
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For category (B), the asset value is up to Rs 5 crore. One major difference is immunity from both penalty and prosecution here comes with the payment of fee of Rs 1 lakh.
Personal imports also cheaper
If a good has been imported for personal use, the tariff rate payable will now be 10%, half of 20% earlier.
Similarly, basic customs duty is exempted for 17 drugs (including for cancer) and seven additional rare diseases.
How companies can benefit
One of the biggest tax bonanza is for data centre companies. The FM has proposed a tax holiday until 2047 for foreign companies that provide global cloud services using Indian data centres.
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Sitharaman said: “Recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide 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 Minimum Alternate Tax (MAT) rate is cut to 14% from 15% earlier and made a final tax. No further credit accumulation from April 1, 2026 will be allowed. MAT is specifically levied on companies that pay little to no tax due to exemptions/incentives and makes sure they still pay a minimum amount.
Union Budget 2025-26: What happened last year
FM Sitharaman built on the momentum of last year’s reform push on Sunday. Here’s what happened last year.
The Union Budget 2025-26 had introduced redesigned tax slabs under the new income tax regime to leave more money in the hands of taxpayers to boost consumption and savings.
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The government raised the basic exemption limit under the new tax regime to Rs 12 lakh
Salaried individuals received a standard deduction of Rs 75 lakh, up from Rs 50 lakh previously.
