Quick Answer
The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, 2026, introduces the new Income Tax Act, 2025 (effective April 1, 2026), cuts the MAT rate to 14%, extends the startup Section 80-IAC window to April 1, 2030, and creates a ₹10,000 crore SME Growth Fund. GST, customs, and FDI rules also change. This guide covers what each change means and what to do about it.
The Finance Bill turns Budget speech into enforceable law. Rates change on fixed dates. Compliance deadlines shift. Sector incentives open and close specific planning windows. Read this before your next board meeting or tax review.
The 2026-27 Budget targets a fiscal deficit of 4.3% of GDP, with nominal GDP growth projected at 10% and real GDP growth at 7-7.5%. Below, we break down the changes by category and flag where each one affects our client industries directly.
What changed in corporate tax and compliance for FY 2026-27?
The new Income Tax Act, 2025 replaces the 1961 Act from April 1, 2026. This is the single most consequential change in the Budget. Confirm your tax provisions and compliance calendar against the new Act before the financial year opens.
Here are the core corporate tax changes:
- MAT rate cut to 14%. The Minimum Alternate Tax rate drops from 15% to 14%. From April 1, 2026, MAT becomes a final tax and no further credit accumulates.
- Brought-forward MAT credit. Companies shifting to the new regime can set off accumulated MAT credit, capped at 25% of tax liability.
- Buyback taxation rationalised. Buyback proceeds are now taxed as capital gains. Promoters pay an additional tax effective 22% for domestic company promoters, 30% for others.
- Single-order proceedings. Penalty and assessment proceedings are integrated into one order.
- Lower prosecution exposure. Maximum prosecution imprisonment falls from 7 years to 2 years. Minor offences now attract a fine only.
- Revised return deadline extended. The deadline moves from December 31 to March 31.
How does staggered ITR filing work under the new Act?
The Budget introduces a staggered filing calendar:
Taxpayer category | Filing deadline |
ITR 1 and ITR 2 | July 31 |
Non-audit businesses and trusts | August 31 |
Mark these dates now. The staggered schedule changes how you plan audit and filing workflows across entities.
What changed for TCS, STT, and safe harbour margins?
Three technical changes matter for finance teams:
- TCS rationalised to 2% for Liberalised Remittance Scheme (education and medical), overseas tour packages, scrap, minerals, and liquor.
- STT raised on futures from 0.02% to 0.05%, and on options to 0.15%.
- IT services safe harbour consolidated at a 15.5% margin. The eligibility threshold rises from ₹300 crore to ₹2,000 crore.
Two more incentives reward specific structures. Foreign companies procuring Indian data centre services get a tax holiday until 2047. The IFSC tax holiday extends to 20 consecutive years within a block of 25, with a post-holiday rate of 15%.
What did the 2026-27 Budget announce for startups and MSMEs?
The Section 80-IAC startup incorporation benefit window is extended to April 1, 2030. DPIIT-recognized startups incorporated before this date can claim the three-year profit-linked deduction. If you are timing an incorporation, confirm the window before you decide to accelerate or defer.
The Budget also builds new funding and compliance infrastructure for smaller businesses:
- ₹10,000 crore SME Growth Fund dedicated to scaling small and medium enterprises.
- ₹2,000 crore top-up to the Self-Reliant India Fund for micro enterprises.
- CGTMSE credit guarantee now supports invoice discounting on the TReDS platform.
- TReDS mandated as the settlement platform for all CPSE purchases from MSMEs.
- TReDS receivables introduced as asset-backed securities.
- ‘Corporate Mitras’ cadre to help MSMEs meet compliance obligations at affordable cost.
Angel tax under Section 56(2)(viib) remains abolished for all classes of investors. For founders raising equity, that removes the earlier tax risk on share premium above fair market value.
Which GST changes matter most for businesses?
The place-of-supply rule for intermediary services changes. IGST Section 13(8)(b) is omitted, shifting the place of supply from the supplier’s location to the recipient’s location. This enables zero-rating for exports of intermediary services, a direct benefit for IT and services exporters.
Three further procedural changes reduce friction:
- Post-sale discount credit notes simplified. No prior agreement is required. ITC reversal by the recipient is sufficient.
- Provisional refunds extended to inverted duty structure claims.
- National Appellate Authority for Advance Ruling. The Government can notify an existing tribunal for this role from April 1, 2026.
If you export intermediary services, review your contracts and invoicing against the new place-of-supply rule before the financial year begins. The zero-rating benefit depends on correct documentation.
What FDI and sector-specific policy changes affect businesses?
The Budget announces a comprehensive review of the FEMA (Non-Debt Instruments) Rules. It also raises foreign portfolio investment limits under the Portfolio Investment Scheme:
- Individual PROI limit raised from 5% to 10%.
- Aggregate limit raised from 10% to 24%.
Manufacturing and technology sectors receive substantial outlay increases. The Electronics Components Manufacturing Scheme outlay rises from ₹22,919 crore to ₹40,000 crore. India Semiconductor Mission 2.0 launches. The Biopharma SHAKTI initiative commits ₹10,000 crore over five years.
What customs duty changes take effect in FY 2026-27?
Customs changes fall into two groups: exemptions that lower input costs, and procedural easing that speeds trade.
Duty exemptions cover:
- Critical minerals, including monazite
- Solar glass inputs
- Lithium-ion cell capital goods for Battery Energy Storage Systems (BESS)
- Nuclear power goods (extended to 2035)
- Civilian aircraft parts
- Defence MRO raw materials
- 17 new cancer drugs and 7 rare disease categories
Procedural and structural customs changes:
- Basic Customs Duty on personal-use durable goods cut from 20% to 10%, effective April 1, 2026.
- Courier export value cap of ₹10 lakh per consignment removed – a direct benefit for startups and small exporters.
- Advance ruling validity extended from 3 years to 5 years.
- AEO duty deferral period extended from 15 days to 30 days.
- SEZ one-time measure: manufacturing SEZ units may sell to the Domestic Tariff Area (DTA) at concessional rates.
What does Budget 2026-27 mean for Altacit's client industries?
We flag the changes that hit each sector directly.
IT & AI: Safe harbour consolidated at 15.5% for all IT services, with the threshold raised to ₹2,000 crore. Data centre tax holiday runs to 2047. India Semiconductor Mission 2.0 strengthens the domestic chip ecosystem.
Startups: Section 80-IAC window extended to April 1, 2030. The ₹10,000 crore SME Growth Fund adds capital access. Angel tax remains abolished.
Healthcare & Pharma: Biopharma SHAKTI commits ₹10,000 crore over five years. Customs duty exemptions cover 17 new cancer drugs and 7 rare disease categories.
Manufacturing: Electronics Components Manufacturing Scheme outlay doubled to ₹40,000 crore. Customs exemptions on lithium-ion cell capital goods and nuclear power inputs. The SEZ-to-DTA concessional sales measure is a one-time opportunity.
Real Estate: CPSE REIT creation announced. The Urban Challenge Fund of ₹1 lakh crore funds city redevelopment.
Hospitality: A National Institute of Hospitality is proposed. The Seaplane VGF Scheme improves tourism connectivity.
Talk to Altacit Global's Corporate and Tax Advisory Team
Budget changes take effect on fixed dates and reward businesses that act early. Our corporate and tax advisory team reviews the 2026-27 Budget’s impact on your specific operations – corporate tax, GST, startup benefits, and sector incentives and builds a compliance and planning roadmap for FY 2026-27. We operate from Chennai, Bangalore, Hyderabad, Kochi, and Coimbatore. Contact us at info@altacit.com.
Frequently Asked Questions: Union Budget 2026-27 Legal Changes
Q1: When does the new Income Tax Act, 2025 take effect?
The new Income Tax Act, 2025 takes effect from April 1, 2026, replacing the Income-tax Act, 1961. It applies for the financial year 2026-27 onward. Review your tax provisions, compliance calendar, and filing workflows against the new Act before the financial year begins, because the change affects assessment procedures, penalty rules, and filing deadlines.
Q2: What happens to accumulated MAT credit after April 1, 2026?
From April 1, 2026, MAT becomes a final tax and no new credit accumulates. Companies shifting to the new regime can set off brought-forward MAT credit against their tax liability, but the set-off is capped at 25% of the tax liability. Companies with large accumulated MAT credit should model the impact of the cap before finalizing their regime choice.
Q3: Which GST change matters most for IT and services exporters?
The most significant GST change for exporters is the omission of IGST Section 13(8)(b). This shifts the place of supply for intermediary services from the supplier’s location to the recipient’s location. The result: exports of intermediary services can now qualify for zero-rating. IT and services exporters should review contracts and invoicing to claim the benefit correctly.
Q4: What new incentives are available for startups after Budget 2026-27?
Startups gain four main benefits: the Section 80-IAC tax holiday window extended to April 1, 2030; a dedicated ₹10,000 crore SME Growth Fund; the removal of the ₹10 lakh courier export value cap; and continued abolition of angel tax under Section 56(2)(viib). Founders should confirm DPIIT recognition dates before finalizing incorporation timing.
