Union Budget redefines the individual tax experience

Withthe Budget now placed before Parliament, many who wait anxiously for this annual exercise will likely feel a sense of relief. Personally, I believe the Budget—at least from an individual’s perspective—should ideally be a largely non-consequential event, intervening only when course correction or genuinely transformative change is required.Instead, it has gradually evolved into a highly hyped spectacle, one that often inflates expectations and, in turn, breeds disappointment. Over time, this anticipation has made the Budget less about steady governance and more about headline-driven outcomes.

Ironically, some of the most consequential fiscal decisions in recent years have been announced outside the Budget itself—whether it was the corporate tax reductions in 2019 or the personal income tax slab changes in 2024. This shift suggests a deliberate move by the government to decouple major policy actions from Budget Day theatrics, reserving the Budget for consolidation rather than surprise.

This Union Budget 2026–27 marks a quiet but powerful shift in India’s personal taxation philosophy—from enforcement-heavy compliance to citizen-centric tax design.At the heart of the Budget lies the Income Tax Act, 2025, replacing a 65-year-old law with one built for a digital, mobile, globally connected taxpayer. Simplified language, redesigned forms, and automation are announced signaling a clear intent: compliance should feel routine, not risky. This is the biggest structural change in decades possibly with less legal interpretation, fewer disputes and easier DIY (Do-It-Yourself) compliance.

The most immediate relief comes through cash-flow friendly measures. By slashing TCS on overseas travel, education, and medical remittances to 2 per cent from 5 per cent, the government addresses a long-standing grievance—money being collected upfront and refunded months later. For families funding education abroad or managing medical emergencies, this is real, tangible relief. It results in lower cash blockages, fewer refunds, and immediate liquidity relief especially for students, families and global Indians. Also, customs duty on imports for personal usage was proposed to cut to 10 per cent from 20 per cent.

In a rare display of empathy, the Budget fully exempts interest awarded by Motor Accident Claims Tribunals from tax. Compensation meant for rehabilitation will no longer be diluted by tax deductions through TDS (Tax Deducted at Source)—a small change with profound human impact. No officer interaction with automated lower/nil TDS certificates for small taxpayers. This removes a major friction for retirees, pensioners, freelancers and investors with multiple income sources.

Compliance reforms go beyond rates. Automated lower-TDS certificates, centralized Form 15G/15H submission via depositories, and extended timelines for revising returns reflect an understanding of how people actually earn, invest, and make mistakes. The system now corrects errors rather than punishing them. ITR (Income Tax Return) revision deadlines are extended to 31st March with a nominal fee. Also, the filing of returns for non-audit business cases & trusts is extended to 31st Aug, lowering stress, fewer penalties and better alignment with real-life realities.

Perhaps the most progressive move is the one-time foreign asset disclosure window. In an era of global careers and digital assets, inadvertent non-disclosure is common. A six-month amnesty-style window is proposed for small foreign income/asset declaration, targeted at students, tech employees, relocated NRIs and first-time global earners. By offering immunity for small assets and a clean-up window without stigma, the government chooses trust over threat. The limit is set at small non-immovable assets less than 20 Lakh under Black Money Act. This is a humane correction mechanism instead of criminalization for genuine mistakes.

Share buy-backs are now taxed as capital gains for all shareholders with an additional tax for the promotor to disincentivize misuse of tax arbitrage. That said, the Budget also nudges behaviour. Higher STT (Securities Transaction Tax) on derivatives reminds retail traders that leverage and speculation carry costs—both financial and systemic. The STT increased on futures by 0.05 per cent and options by 0.15 per cent. The message is subtle but firm: productive investing over churn, thus increasing barriers for frequent traders while long-term investors remain unaffected. Hope retail investors take note.

In sum, Budget 2026–27 does not merely tweak slabs or rates. It reimagines the relationship between the individual and the tax system—simpler, fairer, and more aligned with modern economic life. For the honest taxpayer, this is one of the most psychologically reassuring Budgets in recent memory.

(The author is a partner with “Wealocity Analytics”, a SEBI registered Research Analyst firm and could be reached at info@wealocityanalytics.com)