How will Budget 2026 announcements impact individual taxpayers from now on?

From hiking the Securities Transaction Tax (STT) on Futures and Options (F&O) trades to rationalising TCS provisions under the Liberalised Remittance Scheme (LRS), and easing NRI property buying norms, here’s a detailed explainer covering every important highlight from the Budget 2026 that every taxpayer should understand.

F&O trading to get expensive because of Securities Transaction Tax hike

After the Budget 2026 announcement:

Sensex fell by 1.88%.

Nifty fell by 1.96%.

Mid-caps fell by 2.24%.

What triggered this negative market reaction? Clearly, it's the government’s proposal to sharply increase STT on derivatives. The move stood in stark contrast to expectations of an STT rollback in the current budget.

Here’s how the new STT rule works. If you sell a future, STT is now raised to 0.05% from 0.025% — a 150% increase. And STT on selling options has gone up from 0.10% to 0.15% of the premium — a 50% increase. If you exercise an option at expiry, the STT is raised to 0.15% from 0.125% — a 20% increase.

F&O make up 99% of trading volume in the Indian stock market. And, this move will hit F&O traders hard, making F&O trading more expensive.

Exactly how will the STT hike on F&O trades impact you? Well, STT is paid on every transaction that you do in the F&O, whether you make a profit or a loss. And higher STT means higher cost for traders who trade in F&O regularly. The increase in STT will increase the breakeven costs per trade.

Here’s the revised cost per trade of NIFTY50.

For example, an earlier ₹325 per lot trade had a breakeven cost of 5 points (₹325/65). After the revision of STT to 0.05%, the breakeven cost has increased to 12 points (₹812/65).

Additionally, the hike is also expected to impact commodity futures and options volumes.

Tax exemption on Sovereign Gold Bonds applies only to original subscribers

Under the new proposal, the government has withdrawn the capital gains tax exemption for investors who purchase SGBs from the secondary market. The exemption will now be available only for original subscribers who hold it continuously until maturity. Which means, if you buy SGBs directly from the government in the primary issue and stay invested until maturity (usually eight years), your capital gains at maturity will continue to remain completely tax-free, as before.

However, if you purchase SGBs from the secondary market or exit before maturity, the exemption will no longer apply and capital gains tax will be charged as per applicable rules.

Why the crackdown? Well, the government’s intent is clear; they want to reward genuine long-term primary investors rather than those trading bonds in the secondary market to secure tax-free exits.

In a nutshell, nothing changes for original subscribers who hold SGBs till maturity, but for those buying SGBs from the stock exchange, you need to factor in the new tax cost. The new rule kicks in on 1 April 2026 for FY 2026-27 and beyond.

How will this change impact the market? See, the proposed regime fundamentally alters the valuation of SGBs traded on exchanges. It may wipe out secondary market premiums. Until now, people were paying 10-15% over NAV specifically because of the tax-free redemption. But now, if you purchased SGBs in the secondary market, you will be paying full tax on those gains. So, the math changes completely!

Interest setoff against mutual fund dividends removed

There is bad news for individuals who borrow to invest in mutual funds, as they will no longer be able to offset interest paid on loans against any dividend or mutual fund income.

Earlier, a limited deduction was allowed subject to a cap, but under the proposed change, the entire dividend or mutual fund income will now be taxed without any interest offset. The rule will become effective from 1 April 2026.

TCS on travel, education and medical abroad reduced

Union Budget 2026 also lowered friction on outward remittance. It proposed a significant reduction in the Tax Collected at Source (TCS) on overseas tour packages, education and medical purposes under the Liberalised Remittance Scheme (LRS).

Previously, overseas tour packages up to ₹10 lakh attract 5% TCS and those in excess of ₹10 lakh attract 20%. Likewise, education and medical remittances under LRS were subject to 5% TCS in excess of ₹10 lakh. Budget 2026 proposes to lower TCS to a uniform 2% across these categories.

For remittances for education and medical purposes, there will be no TCS on amounts below ₹10 lakh, whether funded personally or through a loan. However, if a remittance exceeds ₹10 lakh and is not obtained through a loan, a TCS of 2% will be applied.

It should be noted that ₹10 lakh threshold for LRS is cumulative for all remittances, and not an individual limit.

How will this impact you? High upfront costs in the form of TCS for overseas education, medical and tour packages can keep your money blocked with the government for months, straining your budget. Lower TCS rates help you alleviate upfront costs and improve cash flow, making it easier for you to manage these expenses.

To put this in perspective, when a large amount is involved (say ₹30 lakh), an extra 5% on ₹20 lakh can increase the cash outgo by ₹1 lakh. Now, when the rate is reduced to 2%, cash outgo would fall to ₹40,000.

One very important point to note here is: The new rule doesn’t change the final tax burden; it only reduces how much tax will be collected at the source when a transfer is being made. Since TCS is usually adjustable against your final tax liability, this move mostly affects cash flow, rather than your tax burden.

Purchasing property from Non-Resident Indians (NRIs) becomes easier

If you have bought a property in India from an NRI, you are probably aware of the cumbersome paperwork, which would often discourage buyers or lead to significant delays. Union Budget 2026 made this process far easier. While the government hasn’t made tax rules any looser, it has removed some unnecessary steps, which can save homebuyers a lot of time, effort, and stress.

Previously, to buy an immovable property from an NRI, the buyer needed a Tax Deduction and Collection Account Number (TAN) to deduct TDS. This led to an unnecessary compliance burden for the buyer, as they would need TAN for a single transaction.

In Budget 2026, the government has proposed to eliminate the need for a separate TAN for TDS on immovable property sales and allow resident buyers to use PAN-based challans. The move aims to reduce paperwork and compliance hurdles, speeding up transactions.

So, starting 1 October 2026, if you are buying an immovable property from an NRI, you won’t need a TAN for such transactions.

Buyback proceeds will be taxed as capital gains for shareholders

Another major overhaul in the budget, which works in your favour, is in the taxation of share buybacks.

Previously, the amount a shareholder received in a buyback was treated as ‘dividend income’ in the hands of the shareholder. This meant that tax was charged on the entire amount at slab rates, which could go up to 35%. But as per Budget 2026, this amount will be taxable in the hands of shareholders as ‘capital gains’, and would attract 20% on short-term gains and 12.5% on long-term gains, depending on how long the shares were held.

In addition, previously, tax was charged on the entire amount as dividend income at slab rates, without allowing any deduction for the original cost of buying the shares. That cost had to be adjusted separately against other capital gains or carried forward. This was a convoluted system, and the new budget simplifies that treatment. Buyback proceeds are now taxed purely as capital gains. Meaning, you take what you received, subtract what you paid for the shares, and tax the difference.

Simplification of tariffs

On the indirect tax side, there’s a big relief for consumers. The Union Budget 2026 proposes reducing the tariff rate on all dutiable goods imported for personal use from 20% to 10%. The new provision would save consumers significant amounts on imported items for personal consumption.

Let’s understand this with an example.

Suppose you import an air conditioner with a CIF value of ₹40,000.

The new rule leads to customs duty savings of ₹5,632 from the example above.

Other than these major tax changes, personal income tax rates themselves are unchanged from last year.

Hope our Budget 2026 decode helps you!

Keep watching this space for more budget updates.