Union Budget 2026: New TDS & TCS Rules Explained
The Union Budget 2026 is going to change the way TDS and TCS work which may affect a lot of people.
We need to understand the TDS and TCS rules in Union Budget 2026 to be prepared.
The new TDS rules and the new TCS rules, in Union Budget 2026 are explained in words here.
The Union Budget 2026 has made changes to the tax system, in India especially when it comes to Tax Deducted at Source and Tax Collected at Source.
These new rules are part of the Income Tax Act 2025. They will start from April 1 2026.
The Union Budget 2026 is really going to affect Tax Deducted at Source and Tax Collected at Source in a way.
The government says that the new tax updates are supposed to make it easier for people to pay their taxes and to get rid of any confusion. They want to make the system better for individuals and businesses.
The government is changing some tax rates so some people will pay more. Some will pay less. They are also changing some rules. Making a few of them not as strict as they were before. The tax updates are meant to simplify tax compliance for individuals and businesses. The government hopes this will make the system smoother, for the tax updates.
Let us understand what really changes and how these changes may affect the user or in this case you and what these changers because we need to know what the changes are so we can see how the changes will affect you.
Higher TCS on Some Goods
There is a change in the TCS rates for some goods. The government is going to collect tax when people sell things like alcoholic liquor, scrap, coal, lignite and iron ore. The Tax Collection at Source rates for these things are going up from 1 percent to 2 percent for most of them. This means that TCS rates for goods, like liquor, scrap, coal, lignite and iron ore will be higher now.
Some changes are not increases. The TCS rate on tendu leaves is an example. It has actually been reduced from 5 percent to 2 percent. This change could be good for traders who deal with forest produce, like tendu leaves. The traders of tendu leaves will benefit from this change.
These changes mostly impact businesses and traders not people who get a salary. They are part of the plan to change the tax system that is happening under the Budget 2026.
Big Relief for Foreign Money Transfers
When you send money to another country under the Liberalised Remittance Scheme or the Liberalised Remittance Scheme there is some help in situations. The Liberalised Remittance Scheme has some rules that can make things a little easier, for you.
Earlier people had to pay a 5 percent tax when they sent money abroad for education loans and medical treatment. Now this tax is 2 percent, which is a big help for education loans and medical treatment. This is really news, for families who send money overseas for their kids to study or for medical emergencies related to education loans and medical treatment.
When we talk about types of foreign remittances the higher tax of 20 percent still has to be paid once the amount goes over ₹10 lakh in a financial year. This means that if you are sending money abroad for things like a vacation or if you are investing money outside the country you will still have to pay the tax collection at the rate of 20 percent, on foreign remittances.
Changes in Overseas Tour Package Tax
Booking an international tour package is also affected.
Earlier the Tax Collected at Source or TCS was 5 percent on money up to ₹10 lakh per year. The Tax Collected at Source or TCS was 20 percent on money beyond that. Now the rules, for the Tax Collected at Source or TCS are different.
The Tax Collected at Source or TCS may be 2 percent. It does not matter how much money you have.. If you have a lot of money the Tax Collected at Source or TCS could still be 20 percent.
So when you travel to another country you might see some changes in the taxes you pay away. This is even though the total amount of tax you really owe is figured out when you add up all your income and file your tax returns. The total tax you owe depends on your income when you file your tax returns, for foreign travel.
Major Relief for Accident Victims
The budget has some good news, for people especially when it comes to Motor Accidents Claims Tribunal compensation. Motor Accidents Claims Tribunal compensation is something that affects a lot of people and this change is very helpful. People who have to deal with Motor Accidents Claims Tribunal compensation will really benefit from this.
The government used to take some money from the interest that people got when they received compensation for accidents. This was called TDS. Now the government says it will not take any money from this interest it does not matter how interest the compensation earns. The compensation is, for accident victims. The interest is what they earn on this compensation. So accident victims will get to keep all the interest they earn on their compensation.
This is a relief for families who are already dealing with financial stress after they have been, in accidents. The main goal here is to make sure that accident victims get the amount of money they deserve without having to worry about complicated tax deductions.
Clear Rule for Manpower Supply Payments
People have been really confused for a time about how TDS should apply to manpower supply services. The thing is, TDS and manpower supply services have been a combination, for years now. Many of us are still trying to figure out how TDS should work with manpower supply services.
The Budget is very clear about this now. It says that manpower supply is considered as work when it comes to tax law. So this means that some amount of money will be taken out as tax when payments are made. This tax is called TDS. The amount of TDS will be one percent or two percent. It depends on who the payment’s made to. If the payment is made to a person or a family then the tax will be one percent.. If the payment is made to a company or any other kind of entity then the tax will be two percent. The Budget says that manpower supply is, like work and so this tax rule will apply to it.
This change gets rid of confusion. It makes sure that all businesses are treated the same when it comes to taxes whether they hire contract staff or use manpower agencies. This means that businesses that hire contract staff or use manpower agencies will all be treated uniformly when it comes to taxes.
Easier Process for Lower or Nil TDS Certificates
Another compliance-friendly step is the move toward fully electronic applications for lower or nil TDS deduction certificates.
People who do not have a lot of money and pay taxes will now be able to use the internet to ask for Tax Deducted at Source deductions to be lowered. The Tax Deducted at Source authorities can. Deny these Tax Deducted at Source certificates on the computer depending on if the taxpayers are eligible, for Tax Deducted at Source.
This makes doing taxes easier because it reduces paperwork it saves time. It helps the government with their plan, for digital tax administration. The digital tax administration is what the government is trying to do.
Relief for Property Buyers Dealing with NRIs
Buying property from a non-resident Indian (NRI) usually means extra compliance, including obtaining a TAN (Tax Deduction and Collection Account Number).
The Budget is giving some relief here. When resident individuals and HUFs buy property from people who do not live in the country they will not have to get a TAN for this one time purchase. Resident individuals and HUFs will really like this change because it makes things easier, for them when they buy property from non-residents.
This is really helpful for middle-class homebuyers. They used to have a lot of work, with tax and registration when they bought a house. The middle-class homebuyers had to deal with all these things for one purchase of a house.
Government Guidelines Now Binding
The government has made another change. Now the official rules about TDS and TCS are like a law. This means that both the people who collect taxes, which are called tax officers and the people who pay taxes, which are called taxpayers have to follow these rules, about TDS and TCS.
This helps to avoid arguments about what the rules mean. It makes things clearer, for people who have to follow the tax rules. The tax rules are easier to understand when things are clear so people know how to follow the tax rules.
Conclusion
The Budget 2026 is attempting to strike a balance between areas that need to follow the rules closely and areas that need relief and simplification. The Budget 2026 is attempting to ensure that it is fair for all. Therefore, the Budget 2026 is attempting to do this by examining each sector and making a decision on what to do. The Budget 2026 is essentially all about striking a balance between things.
Companies that sell minerals, scrap and liquor might have to pay Tax Collected at Source.
Families who send money to countries for their kids to study or for medical treatment do not have to pay as much.
People who get hurt in accidents get all the money they are owed without any Tax Deducted at Source.
When people buy property from Non Resident Indians they have to do paperwork.
The main thing they want to do is make India tax deduction system better and easier to understand so people do not get confused and argue about it. They want to modernize India tax deduction system. This will help reduce confusion, about India tax deduction system and disputes related to India tax deduction system.
The new TDS and TCS rules under Union Budget 2026 are really interesting. They show that the government wants the TDS and TCS system to be stricter when it is needed. It should be easier for people who are genuine taxpayers. So the government is increasing some taxes. At the same time it is removing many compliance hurdles that were making things difficult, for the genuine taxpayers of the TDS and TCS system.