New Delhi, March 31 (NationPress) As India prepares for the upcoming fiscal year FY27, significant transformations in the country's direct tax framework are set to take effect from April 1, 2026. The new Income Tax Act of 2025 will replace the antiquated 1961 legislation, introducing substantial shifts in compliance, terminology, and taxation methods.

A pivotal change under this new structure is the consolidation of the 'Financial Year' (FY) and 'Assessment Year' (AY) into a singular 'tax year', which is anticipated to streamline the filing process and enhance clarity for taxpayers.

Furthermore, the deadlines for submitting income tax returns have been adjusted. While the July 31 deadline for salaried individuals remains intact, non-audit cases such as self-employed individuals and professionals will have until August 31 to file their returns.

The cost of engaging in derivative trading will increase, as the Securities Transaction Tax (STT) has been raised for futures and options, as announced by Finance Minister Nirmala Sitharaman.

In addition, regulations regarding the claiming of House Rent Allowance (HRA) have been tightened, necessitating landlords' details, including PAN, in certain situations. The eligibility criteria for cities qualifying for the higher HRA exemption have also expanded, with Bengaluru, Hyderabad, Pune, and Ahmedabad now included alongside the existing metropolitan areas.

Moreover, tax benefits for employees have been improved, with increased exemptions on meal benefits and a higher annual limit on tax-free gifts.

Allowances for children, encompassing education and hostel expenses, have also seen an uptick under the previous tax regime.

A significant shift is in the taxation of stock buybacks, which will now be classified as capital gains rather than deemed dividends, affecting both promoters and retail investors.

The government has also revised the tax treatment for Sovereign Gold Bonds, limiting exemptions on redemptions to bonds purchased during the original issuance.

New regulations will further prohibit the deduction of interest expenses against dividend and mutual fund income, even if such investments are financed through loans.

To streamline processes, taxpayers will be permitted to submit a single declaration to avoid TDS across various income sources. Additionally, buyers acquiring property from non-resident Indians can now deduct TDS using their PAN, eliminating the previous requirement for a TAN.

Taxpayers will benefit from a reduced Tax Collected at Source (TCS) on overseas trips, now set at a flat 2 percent. TCS on remittances for educational and medical expenses abroad has also been decreased.

Moreover, taxpayers will have a longer period to revise their returns, with the deadline extended to March 31, though additional fees will apply for late submissions beyond December.

Among other changes, interest earned on compensation awarded by the Motor Accident Claims Tribunal has been designated as fully tax-exempt.

Importantly, the government has released the income tax return forms (ITR-1 to ITR-7) for the assessment year 2026-27, allowing individuals, pensioners, and other taxpayers to commence filing their returns within the designated timelines.

Experts have noted that the updated forms include significant modifications. For instance, ITR-1 (Sahaj) can now accommodate income reporting from up to two house properties, an increase from the previous limit of one, which is expected to facilitate filing for numerous taxpayers.