A 20-year tax holiday for any foreign company that procures data centre services in India and new safe harbour provisions with a higher threshold for software firms will also be effective from Wednesday with the start of the 2026-27 fiscal.
The Income-tax Act, 2025, which will replace the extant law from Wednesday, aims to simplify the country’s tax regime and provides for easier filings for a wider base of taxpayers.
The Central Board of Direct Taxes also notified the relevant return forms. The ambit of income tax return Form 1 (ITR-1 SAHAJ) is widened and Indians having up to two registered houses can use it for filing tax returns. This simpler form was earlier limited to individuals with just one housing property registered against their name.
The new forms (ITR-2 and ITR-3), released on Tuesday, also seek detailed disclosures for income from virtual digital assets (VDA), and tax deferred on the employee stock ownership plan (ESOP).
The securities transaction tax (STT) on futures contracts will rise to 0.05% from 0.02%, while that on options premiums and exercise of options will be raised to 0.15% from 0.1% and 0.125%, respectively.
The budget for 2026-27 introduced higher STT to curb speculative bets being placed on shares in the futures and options (F&O) segment of equity markets and protect small investors from losses in speculative trades.
Similarly, the lower tax collected at source (TCS) on overseas tour packages and on remittances under the liberalised remittance scheme (LRS) for medical and education purposes is aimed at helping the middle class. TCS on overseas tour packages is slashed to 2% from 20%.