April 1 tax reset: New I-T law, TCS cuts, higher F&O levy explained
New Delhi, Apr 1, 2026
FY27 begins on Wednesday, ushering in a revised Income Tax framework, increased derivatives trading levies, and overseas spending relief.
The changes, announced in the Union Budget in February, are expected to impact individual taxpayers, retail investors, and businesses alike.
New Income Tax Act kicks in
Income Tax Act, 2025, replaces the law enacted in 1961 to simplify language and improve ease of compliance.
A notable change is the move to a single “tax year”, replacing the earlier system of “previous year” and “assessment year”. This is intended to make tax timelines easier to understand.
However, the transition will be gradual:
• Returns to be filed in July 2026 for income earned in FY26 will still follow the old law
• Ongoing tax disputes and proceedings will continue under the earlier Act
• Advance tax payments starting in June 2026 will align with the new system
The tax department has also enabled its e-filing portal to support both regimes during the transition phase.
Higher STT on F&O trades effective today
From April 1, the government has increased the securities transaction tax (STT) on equity derivatives, raising the cost of trading in futures and options (F&O).
The revised rates are:
• Futures: 0.05 per cent (earlier 0.02 per cent)
• Options premium: 0.15 per cent (earlier 0.1 per cent)
• Options exercise: 0.15 per cent (earlier 0.125 per cent)
The move is aimed at curbing excessive speculative activity in the derivatives segment, where retail participation surged in recent years.
Data cited by PTI shows that over 1 million individuals traded in equity derivatives in FY25, with many incurring significant losses. A study by India’s capital markets regulator estimated cumulative retail losses in this segment at over Rs 1 trillion during the year.
Overseas spending gets cheaper from today
For individuals planning foreign travel or education, lower tax collected at source (TCS) rates also take effect today.
The revised rates are:
• Overseas tour packages: reduced to 2 per cent from 20 per cent
• Remittances for education and medical purposes under LRS: cut to 2 per cent from 5 per cent
This sharply reduces the upfront tax burden on such expenses, improving cash flow for households. The TCS amount can still be adjusted against the final tax liability.
Tax incentives for data centres begin today
The government’s push to position India as a global data centre hub also comes into effect today.
Foreign companies procuring data centre services in India will now be eligible for a tax holiday of up to 20 years, valid until 2047. This ensures that global income linked to such operations is not taxed in India, addressing a key concern for multinational firms.
The policy also creates a level-playing field between companies setting up their own data centres and those outsourcing services to Indian providers.
Higher safe harbour limits for IT sector
From Wednesday, the threshold for safe harbour provisions for IT and IT-enabled services firms has been raised significantly—from Rs 300 crore to Rs 2,000 crore.
This is expected to reduce tax disputes, provide greater certainty, and lower compliance costs for large technology companies.
With these provisions now in force, April 1 marks a clear shift in India’s tax landscape.
Salaried individuals and taxpayers will gradually move to a simpler tax framework
Overseas travel and education expenses become less tax-heavy upfront
Active derivatives traders will face higher transaction costs
Businesses, especially in tech and digital infrastructure, get a more supportive tax environment
While some changes, like the new tax law, will play out over time, others, such as revised TCS and STT rates, will have an immediate impact starting today.
(with inputs from PTI)
[The Business Standard]
