Income Tax Rules Changing From April 1: New ITR Dates, STT Hike And Revised Return Window Extended

India's direct tax framework is set for a major reset from April 1, 2026, as the Income-tax Act, 2025 replaces the six-decade-old Income-tax Act, 1961. While the proposals announced in Union Budget 2026 remain unchanged, the new law brings in a simpler structure, revised timelines and several changes that will affect salaried taxpayers, investors, businesses and those making overseas payments.

Tax professionals say the overhaul is designed to make compliance easier while also tightening certain rules around returns, deductions and market-linked transactions.

New Income-tax Act, 2025 To Replace 1961 Law

The most significant structural change is the formal replacement of the Income-tax Act, 1961 with the Income-tax Act, 2025 from April 1, 2026. The new law keeps the Budget 2026 proposals intact but introduces simplified language and a more streamlined framework.

"The Income-tax Act, 2025 introduces structural, conceptual and procedural changes across the direct tax framework," chartered accountant Suresh Surana said.

One of the most notable changes is the introduction of the "Tax Year" concept. This will replace the long-standing distinction between "previous year" and "assessment year" under the 1961 law. According to Surana, the move is aimed at making the tax system easier to understand by using a single term for the period in which income is earned and taxed.

ITR Filing Deadlines Revised, Return Revision Window Extended

For individual taxpayers, there is no change in income tax slab rates under either the old tax regime or the concessional tax regime, ensuring continuity in tax outgo.

However, return filing timelines are being revised for certain categories of taxpayers. The government has proposed extending the due date for taxpayers engaged in business or profession whose accounts are not subject to audit, along with partners of such firms and certain trusts.

Under the new structure, their ITR filing deadline will move from July 31 to August 31. At the same time, individuals filing simpler returns such as ITR-1 and ITR-2 will continue to follow the July 31 deadline.

The revised filing calendar will broadly work like this:

• July 31: All other taxpayers, including those filing simple returns
• August 31: Business or professional taxpayers not requiring audit
• October 31: Companies and taxpayers whose accounts require audit
• November 30: Assessees covered under special provisions such as Section 172 cases

These changes will apply from Tax Year 2026-27 under the Income-tax Act, 2025. Similar provisions are also set to take effect from March 1, 2026 under the existing law for Assessment Year 2026-27.

Another key relief comes in the form of a longer revised return filing window. At present, taxpayers can revise returns within nine months from the end of the relevant tax year or before assessment is completed, whichever is earlier. Under the new framework, this limit will be extended to 12 months from the end of the tax year.

But there is a catch. If the revised return is filed after nine months, an additional fee will apply:

• Rs 1,000 if total income does not exceed Rs 5 lakh
• Rs 5,000 if total income exceeds Rs 5 lakh

STT Rates To Rise As Government Targets Derivatives Activity

The government has also moved to raise Securities Transaction Tax (STT) rates from April 1, 2026, citing the rapid expansion in derivatives trading and growing speculative activity in the futures and options market.

Under the revised rates:

• STT on sale of options will rise from 0.10% to 0.15%
• STT on sale of options where the contract is exercised will increase from 0.125% to 0.15%
• STT on sale of futures will jump from 0.02% to 0.05%

This change is likely to increase transaction costs for active derivatives traders, especially in the F&O segment.

TCS Changes, Buyback Tax Shift And New Exemptions Explained

Another major set of amendments relates to Tax Collected at Source (TCS), with the government rationalising rates across multiple categories to simplify the framework.

According to Surana, the aim is to align the levy with changing economic realities and compliance needs.

Key TCS changes include:

• Alcoholic liquor for human consumption: Rate increased from 1% to 2%
• Tendu leaves: Rate reduced from 5% to 2%
• Scrap and minerals such as coal, lignite and iron ore: Rate increased from 1% to 2%
• LRS remittances above Rs 10 lakh for education or medical treatment: Rate cut from 5% to 2%
• LRS remittances for other purposes: Continues at 20%
• Overseas tour packages: Existing slab of 5% up to Rs 10 lakh and 20% above Rs 10 lakh replaced with a uniform 2%
• Motor vehicles and other luxury goods: Continues at 1%, Surana noted

The new law also broadens tax relief for employer-provided commuting benefits. Earlier, if an employer provided a vehicle for travel between home and office, its value was not treated as a taxable perquisite. Under the Income-tax Act, 2025, this exemption will now also cover commuting expenditure incurred or reimbursed by the employer, widening the benefit for employees.

A major shift has also been proposed in the taxation of share buybacks. At present, buyback proceeds are treated as dividend income in the hands of shareholders, while the cost of acquisition of extinguished shares is recognised as a capital loss.

The proposed amendment changes this treatment by classifying buyback consideration as capital gains income instead.

According to Surana, this could raise the effective tax burden for certain shareholders.

"The proposed amendment will instead treat buyback consideration as capital gains income."

He added that promoters may face an effective tax incidence of around 30%, while promoter companies could see a tax rate of 22%, excluding surcharge and cess.

Another important tightening comes in the treatment of interest deductions against passive income. Under the earlier law, taxpayers could claim interest expense deductions up to 20% of dividend or mutual fund income. The Income-tax Act, 2025 proposes to fully disallow interest deductions incurred for earning dividend income or income from mutual funds.

Surana said the move may increase taxable income for investors earning passive returns from dividends or mutual funds, although interest incurred for earning other taxable interest income will still remain deductible under general provisions.

Overall, the Income-tax Act, 2025 marks one of the biggest direct tax overhauls in recent decades, with April 1, 2026 set to become a key transition date for taxpayers across categories.