New Tax Rules with Higher F&O STT from Apr 1

India’s new income tax law, along with several budgetary provisions, will come into effect from April 1, 2026. Key changes include higher Securities Transaction Tax (STT) on futures and options trades, lower Tax Collected at Source (TCS) on overseas tour packages, and remittances under the Liberalised Remittance Scheme (LRS) for medical and education purposes.

The Income-tax Act, 2025, replaces the 1961 Act, aiming to simplify tax rules in a more logical and reader-friendly format. It eliminates the distinction between the previous year and assessment year, introducing a single “tax year” framework. Taxpayers can also claim TDS refunds even after filing delays, without penalties. The Income Tax department will continue all pending assessments, appeals, and proceedings under the old Act, while advance tax for FY27 will follow the new rules.

STT on F&O trades will rise to 0.05% for futures and 0.15% for options (premium and exercise), up from 0.02% and 0.1–0.125%, respectively. The move aims to curb speculative trading and protect small investors. Unique individual investors in the F&O segment fell from 1.06 crore in FY25 to 75.43 lakh in FY26 (till Dec 2025), with net losses exceeding Rs 1.05 lakh crore in FY25.

TCS on overseas tour packages is reduced to 2% from 20%, and LRS remittances for medical or educational purposes will attract 2% TCS instead of 5%, benefiting the middle class.

Budget measures also include a 20-year tax holiday for foreign companies procuring Indian data centre services, ensuring their global income is not taxed in India. Additionally, the safe harbour threshold for IT/ITeS firms rises from Rs 300 crore to Rs 2,000 crore, offering certainty and reducing litigation.