What Are the Four Amendments to the Income Tax Act for FY26?
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Synopsis
The Indian government has introduced four pivotal amendments to the Income Tax Act that will significantly impact taxpayers in the upcoming fiscal year. From tax exemptions for sovereign funds to clarifications on deductions, these changes aim to simplify tax compliance and enhance the investment landscape.
Key Takeaways
- Four amendments to the Income Tax Act introduced.
- New tax exemptions for sovereign funds.
- Clarification on standard deductions for salaried individuals.
- Alignment of Unified Pension Scheme with NPS.
- Enhanced ease of doing business.
New Delhi, Aug 14 (NationPress) The government has rolled out four significant amendments to the Income Tax Act of 1961, pertinent for the fiscal year 2025-26 but incorporated in the Income Tax Bill, 2025, applicable for FY 2026-27, as stated by Union Finance Minister Nirmala Sitharaman.
The primary amendment provides tax exemption on dividends, interest, and long-term capital gains for sovereign wealth and pension funds investing in infrastructure, effective from April 1, 2020, through December 31, 2030, pending notification.
The Public Investment Fund (PIF) along with its wholly-owned subsidiaries will be explicitly mentioned in the exemption section.
The second crucial clarification pertains to the abatement of all assessments for block periods in search cases until a block assessment order is issued, marking a major reform aimed at enhancing the ease of doing business.
Moreover, the minister announced that the amendment clarified the standard deduction of Rs 75,000 applicable to salaried individuals under the new tax regime.
The Finance Act, 2023 introduced Section 115BAC(1A), which presents new tax slab rates for those opting for the new tax regime. However, a drafting error occurred, as a specific clause (clause iii) was missing from Section 115BAC(1A).
This omission led to the unavailability of the enhanced standard deduction of Rs 75,000 for the fiscal year 2025-26. The recent amendment passed by Parliament rectified this error.
The fourth amendment addressed the Unified Pension Scheme (UPS), clarifying deductions and aligning it with the National Pension System (NPS) for tax purposes. The amendment now offers the same tax benefits to UPS as provided under NPS.
Under NPS, up to 60 percent of the accumulated corpus can be withdrawn tax-free upon closure or opting out. Additionally, partial withdrawals, up to 25 percent of self-contributions, are also exempt from taxable income. The amendment extends these tax exemptions to UPS, ensuring parity between both schemes.
Point of View
We recognize the importance of these amendments in fostering a favorable business environment. The government's proactive approach to tax reforms demonstrates a commitment to enhancing investor confidence and simplifying compliance. We support these changes as they align with the nation's goals of economic growth and development.
NationPress
07/09/2025
Frequently Asked Questions
What are the main amendments to the Income Tax Act?
The main amendments include tax exemptions for sovereign wealth and pension funds, clarifications on standard deductions, and alignment of the Unified Pension Scheme with the National Pension System.
How do these amendments affect individual taxpayers?
Individual taxpayers will benefit from clarified deductions and tax exemptions, potentially leading to lower tax liabilities.
What is the timeline for these amendments?
The amendments are included in the Income Tax Bill, 2025, and will be applicable for FY 2026-27.
