The Union Budget 2026-27 has unveiled several key fiscal measures that will impact both financial markets and individual taxpayers across the country. The budget presents a balanced approach between revenue generation and providing targeted relief to specific segments of society.

Securities Transaction Tax Changes

The budget has announced an increase in Securities Transaction Tax (STT) on derivatives trading. This measure is expected to affect market participants engaged in derivatives transactions, potentially influencing trading patterns and market dynamics in the financial sector.

Tax Relief Measures

The budget introduces significant relief measures for taxpayers in two critical areas. Tax reliefs have been announced for overseas education expenses, which will benefit families sending their children abroad for higher studies. This measure acknowledges the growing trend of international education and aims to reduce the financial burden on families.

Similarly, tax reliefs for medical expenses will provide much-needed support to individuals and families dealing with healthcare costs. This initiative reflects the government's recognition of the financial strain that medical treatments can place on households.

MACT Interest Exemption

In a notable move for accident victims and their families, the budget has made interest earned from Motor Accident Claims Tribunal (MACT) awards tax-free. This exemption ensures that compensation received by accident victims or their beneficiaries retains its full value without additional tax liability.

Budget Overview

The Union Budget 2026-27 demonstrates the government's approach to balancing revenue requirements with targeted relief measures. While the increased STT on derivatives aims to generate additional revenue from financial market transactions, the tax reliefs for education and medical expenses, along with the MACT interest exemption, focus on providing support in areas of essential spending and compensation.

The Union Budget 2026-27 has taken a measured approach to personal taxation, maintaining existing income tax rates while introducing significant structural reforms to improve taxpayer experience and compliance processes.

Personal Income Tax Rates Remain Unchanged

The government has decided to keep personal income tax rates at current levels for the fiscal year 2026-27. This decision provides stability and predictability for individual taxpayers who will continue to operate under the existing tax slab structure.

Focus on Tax Process Simplification

The budget places considerable emphasis on streamlining tax processes to make them more user-friendly and efficient. The government's approach centers on reducing bureaucratic complexities that taxpayers currently face during filing and assessment procedures.

Penalty Reduction and Compliance Improvements

Key reform measures announced in the budget include:

• Penalty Reduction: The government plans to implement measures that will reduce penalties imposed on taxpayers
• Compliance Easing: New initiatives aimed at making tax compliance less burdensome for individuals and businesses
• Process Optimization: Streamlined procedures to improve overall taxpayer experience

New Income Tax Act Implementation

A major development announced in the budget is the introduction of a comprehensive new Income Tax Act, scheduled to take effect from April 1, 2026. This new legislation represents a significant overhaul of the existing tax framework and is expected to incorporate the various simplification measures outlined in the budget.

The budget's approach reflects the government's commitment to maintaining tax rate stability while modernizing the underlying framework to create a more efficient and taxpayer-friendly system for the upcoming fiscal year.