The Centre has completed the implementation of several major direct tax reforms announced in recent Union Budgets, with an aim to boost investment certainty and reduce the compliance burden for taxpayers. As the presentation of the Union Budget 2026-27 approaches, the ministry of finance shared details of the legislative changes through a post on X.A key reform relates to Alternative Investment Funds (AIFs). To provide “certainty of taxation”, the Finance Act, 2025, amended Section 2(14) to classify securities held by Category I and Category II AIFs as capital assets. As a result, income from the transfer of such securities will be taxed under “Capital Gains” instead of “Profits and Gains of Business or Profession”. This amendment will take effect from April 1, 2026, and apply to Assessment Year 2026-27, aligning Indian AIFs with Foreign Portfolio Investors, as per news agency ANI.
Push for startups, manufacturing and infrastructure
The government has also extended tax incentives to strengthen startups and electronics manufacturing. Section 80-IAC was amended to extend the incorporation deadline for eligible startups to March 31, 2030.These startups can claim a “100% profit deduction for 3 consecutive years in their first 10 years” of operations.To support electronics manufacturing, a presumptive taxation regime under Section 44BBD was introduced for non-residents providing services or technology to electronics units, taxing them on a deemed profit of 25 per cent of gross receipts.Infrastructure received a boost with the extension of the Tonnage Tax Scheme to inland vessels, following an amendment to Section 115VD, effective April 1, 2026.
Relief for individuals and steps to cut litigation
For individual taxpayers, withdrawals from National Savings Scheme (NSS) accounts made on or after August 29, 2024, are now “fully tax-exempt”, while NPS Vatsalya offers an “additional deduction of up to Rs 50,000” under Section 80CCD(1B), over the Section 80C limit. Property tax rules were simplified to allow nil annual value for two properties without conditions.To reduce disputes, the finance act introduced a three-year block period for transfer pricing assessments and expanded Safe Harbour rules, raising the turnover threshold to Rs 300 crore and adding new sectors such as electric vehicle components.
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