Finance Bill 2026: Key Tax Amendments Every Business Must Understand Before April 1

The Finance Bill, 2026, introduced alongside the Union Budget, makes targeted amendments to both the Income Tax Act, 2025 and the Income Tax Act, 1961. While the new Income Tax Act takes effect on April 1, 2026, the Finance Bill layers additional changes on top of it, several of which have immediate compliance significance for businesses, employers, and individual taxpayers. Understanding the Finance Bill in full is essential to planning for the first complete financial year under the new tax regime.

MAT Rate Reduction and What It Means for Companies

The Finance Bill, 2026 proposes to reduce the Minimum Alternate Tax rate from 15 percent to 14 percent of book profit. This change benefits companies whose tax liability under the normal provisions falls below the MAT threshold, which is common for infrastructure businesses, capital-intensive manufacturers, and early-stage companies with significant depreciation or deferred tax assets. For these entities, the rate reduction provides a direct reduction in their minimum tax obligation for FY 2026-27. Companies should recalculate their advance tax estimates and working capital projections to reflect the revised rate before the first advance tax instalment falls due on June 15, 2026.

TDS and TCS Changes Effective April 1, 2026

Several significant changes to the Tax Deduction at Source and Tax Collection at Source framework take effect from April 1, 2026. Supply of manpower has been newly included under the definition of 'work' for TDS purposes under the Income Tax Act, 2025. This means payments made for manpower supply services, including contract staffing, will now attract TDS obligations that were not previously mandatory under the 1961 Act for these arrangements. Businesses relying heavily on third-party workforce providers should update their vendor payment processes and ensure TDS is deducted from the first payment after April 1. On the TCS side, the Finance Bill substantially reduces the rate on Liberalised Remittance Scheme remittances for education and medical purposes from 5 percent to 2 percent. The rate on overseas tour packages is also restructured. Resident individuals buying immovable property from non-residents will no longer need to obtain a TAN from October 1, 2026, reducing one procedural hurdle for this category of purchaser.

Return Filing Deadlines Extended

The Finance Bill extends the due date for filing income tax returns for non-audit assessee businesses and trusts from July 31 to August 31 of the assessment year. This additional month of runway is a practical concession given the volume of compliance work that accumulates at year-end. The window for filing updated returns is also being extended under the new Act framework. These changes apply from the first return filing cycle under the Income Tax Act, 2025, covering returns for FY 2026-27 that are due in 2027. Finance and compliance teams should revise their internal tax calendars to capture these new deadlines.

Transitional Provisions: Which Act Governs Pending Proceedings

For companies with open tax proceedings, the Finance Bill's transitional provisions are critical. Assessment, reassessment, and appellate proceedings initiated for tax years before FY 2026-27 continue to be governed by the Income Tax Act, 1961. The Finance Bill clarifies the interaction between the two Acts for pending matters, including how provisions of the 1961 Act are to be read in the context of ongoing scrutiny assessments, appeals before the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal, and High Courts. Companies with significant open tax positions, including transfer pricing disputes, reassessment notices, and disallowance appeals, need to confirm with their tax advisors which Act governs each specific proceeding before making any admissions or submissions.

Practical Takeaways

Tax and finance teams should immediately update their advance tax computation models to apply the revised MAT rate of 14 percent. Accounts payable functions should identify all manpower supply contracts and implement TDS deduction at source before the first payment after April 1, 2026. Return filing calendars should be updated to reflect the August 31 extended deadline for eligible non-audit assessees. Companies with pending assessments or reassessments under the 1961 Act should review their open matters and confirm transitional applicability with their tax counsel. The Finance Bill and the Income Tax Act, 2025 must be read together as an integrated package, not as independent documents, to understand the full compliance picture for FY 2026-27.