The Union Budget 2026 has kept personal income tax slabs unchanged, but it introduces a set of targeted changes focused on compliance, market transactions and penalties that could affect both taxpayers and investors. While headline tax rates remain the same, revisions related to derivatives trading, filing timelines, buybacks and crypto disclosures indicate a recalibration of parts of the tax framework. There is no change in income tax slabs or rates for individuals and salaried taxpayers, meaning the basic tax structure and overall outgo remain unchanged. However, several rule-level adjustments may still influence how income is reported and assessed.

From April 1, the cost of derivatives trading is set to rise following an increase in Securities Transaction Tax. The STT on exercised stock options will go up from 0.125 percent to 0.15 percent, calculated on intrinsic value, while the STT on futures trades will increase from 0.02 percent to 0.05 percent, calculated on the traded price. These higher rates will apply to transactions executed on or after April 1 and may marginally raise costs for active F&O traders.

The Budget also changes the tax treatment of share buybacks. Buyback proceeds will now be taxed as capital gains instead of dividend income. Under the proposal, non-corporate promoters could face a capital gains tax rate of up to 30 percent, while corporate promoters will be subject to a lower effective rate of around 22 percent. This move is intended to curb the use of buybacks as a primary method for extracting profits.

In a relief measure, interest earned on compensation awarded by Motor Accidents Claims Tribunals will become fully tax-exempt from April 1. This exemption will apply to victims or their legal heirs in cases involving injury or death. Taxpayers will also get more time to revise their income tax returns. The deadline for filing revised returns is proposed to be extended to March 31 from the earlier December 31 cut-off, allowing additional time to correct mistakes or omissions in previously filed returns.

The government has reiterated that the new Income Tax Act will come into force from April 1, with simplified provisions and forms to be notified separately. This is aimed at making compliance easier and reducing ambiguity in tax rules. The Budget proposes reduced maximum jail terms for certain tax offences. For general offences, the maximum imprisonment period is proposed to be lowered to two years, while repeat offences may attract a maximum of three years. In cases of non-payment of TDS or TCS, the maximum jail term will be capped at two years, with fines prescribed as the minimum penalty.

Penalties related to crypto asset reporting have been tightened. Failure to furnish required statements could attract a penalty of Rs 200 per day, while inaccurate reporting or failure to correct details may result in a penalty of Rs 50,000. An immunity mechanism has also been proposed for underreporting cases. Taxpayers may seek immunity from penalty and prosecution if they pay the due tax and interest on time and do not file an appeal against the assessment order. Although income tax slabs remain unchanged, the Budget introduces meaningful changes to compliance rules, transaction taxes and penalty provisions that taxpayers and market participants will need to track closely.