New income tax law, higher STT on F&O trades kick in from April 1

A host of major tax and financial changes announced in the Union Budget will come into force from April 1 marking the beginning of the 2026ndash27 financial year The rollout includes the implementation of the new Incometax Act 2025 higher Securities Transaction Tax STT on derivatives trading and reduced Tax Collected at Source TCS on overseas remittances and tour packages reported news agency PTINew Income Tax Act to Replace SixDecadeOld LawThe Incometax Act 2025 will replace the existing Incometax Act 1961 aiming to simplify tax provisions and make them more structured and userfriendly While the core tax policies remain largely unchanged the new law introduces a more streamlined format to improve readability and compliance reported PTIThe Income Tax Department has clarified that during the transition phase its efiling portal will support both the old and new systems Assessments appeals and proceedings related to previous years will continue under the old law until completion Taxpayers filing returns for Assessment Year 2026ndash27 in July 2026 will still use forms prescribed under the earlier Act reported PTISingle lsquoTax Yearrsquo Concept IntroducedOne of the key structural changes is the introduction of a unified ldquotax yearrdquo system replacing the earlier distinction between ldquoprevious yearrdquo and ldquoassessment yearrdquo This reform is expected to reduce confusion and simplify compliance for taxpayersAdditionally the new framework allows taxpayers to claim TDS refunds even if income tax returns are filed after the deadline without attracting penalties Advance tax payments for the 2026ndash27 tax year starting June 2026 will be governed by the new law reported PTIHigher STT on FampO Trades to Curb SpeculationA significant marketrelated change is the increase in Securities Transaction Tax on futures and options FampO trades STT on futures contracts will rise from 002 per cent to 005 per cent while options trading will also see higher taxation reported PTIThe move is aimed at curbing excessive speculative trading in the derivatives segment and protecting small investors from large losses Data indicates that while participation in equity derivatives surged in recent years a large number of individual investors suffered substantial lossesA study by Securities and Exchange Board of India found that individual investors incurred net losses exceeding Rs 1 lakh crore in FY25 The number of active individual traders in the FampO segment also declined in FY26 reflecting growing caution among investors reported PTIRelief for Middle Class via Lower TCS RatesIn a move to ease the financial burden on individuals the government has reduced TCS rates on overseas tour packages and remittances under the Liberalised Remittance Scheme LRS TCS on international tour packages has been slashed to 2 per cent from 20 per centSimilarly remittances for medical and education purposes abroad will now attract a lower TCS rate of 2 per cent down from 5 per cent These changes are expected to benefit middleclass families managing expenses related to travel healthcare and education overseas reported PTIBoost for Data Centres and IT SectorThe Budget also introduces a major incentive for the digital infrastructure sector Foreign companies procuring data centre services in India will be eligible for a 20year tax holiday until 2047 This is expected to attract global players while ensuring that their overseas income is not taxed in India reported PTIDomestic data centre operators are likely to gain from increased demand as the policy ensures equal tax treatment whether companies set up their own facilities or outsource services locallyAdditionally the safe harbour threshold for IT and ITenabled services has been significantly increased from Rs 300 crore to Rs 2000 crore This is expected to reduce litigation and provide greater tax certainty to companies operating in the sectorOverall the new tax framework and accompanying measures signal a shift towards simplification investor protection and sectoral growth while offering targeted relief to taxpayersWith inputs from PTI