Budget 2026: 5 Changes Every CA Should Brief Their Clients On

The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on 1 February 2026, did not deliver the sweeping rate changes that some had anticipated. What it did deliver is a set of procedural and structural reforms that directly affect how clients file returns, how they manage tax positions, and how CAs handle certain compliance obligations. The changes are not dramatic in isolation, but together they shift the workflow for a number of common client types.

Five changes stand out as most relevant for the clients of a typical CA practice: salaried professionals, small business owners, investors, and property holders.

1. The New Income Tax Act Comes Into Effect

The most significant structural change from this budget cycle is the coming into force of the new Income Tax Act, 2025, effective from 1 April 2026. This is not a new tax law in the sense of changing rates or categories; it is a rewrite of the Income Tax Act, 1961, consolidating decades of amendments, removing redundant provisions, and rewriting sections in plain language.

For clients, the practical impact is primarily in the numbering of sections. The section numbers they may have learnt, the standard deduction under "Section 16", the 80C deduction under "Section 80C", will now have different numbers in the new Act. The underlying rules are largely preserved, but the references change.

For CAs, this means: update your client communication templates, checklist documents, and any internal tools that reference section numbers. When advising clients orally, be prepared for confusion when clients google an old section number and find it does not match the new Act. The CBDT has indicated it will publish a section-mapping guide, but until that is widely disseminated, the transition will require extra care in client communications.

The new Act is also expected to simplify documentation requirements for several deductions that previously required voluminous supporting records. Specific notifications on this are expected over the coming months.

2. ITR Filing Deadline Extended for Non-Audit Cases

For non-audit cases (other than ITR-1 and ITR-2 filers), the due date for filing income tax returns has been extended from 31 July to 31 August, with the extended due date for ITR-3 and ITR-4 filers set at 31 August 2026 for AY 2026-27.

This is a meaningful operational change for CA practices. August rather than July as the non-audit deadline gives practices an additional month to process business income returns without compressing the salaried return work into the same window. In a typical practice, July is the peak pressure point; the one-month extension for business filers should allow for better resource allocation.

For clients with business income under presumptive schemes (ITR-4), this extension means they have more time to gather final bank statements, loan account summaries, and trading statements. Brief them early so they do not treat the extension as permission to delay document handover; the preparation lead time remains necessary.

Audit cases remain on a 31 October deadline. Revised returns can be filed up to 31 March 2027, though a late-filing fee applies after 31 December 2026.

3. GST Post-Sale Discount Rules Simplified

One of the more practice-relevant GST changes in Budget 2026 addresses post-sale discounts. Previously, for a discount given after sale (such as a year-end volume discount or a trade promotion settlement) to be excluded from the taxable value, a pre-existing written agreement was required between the supplier and the recipient. Many businesses ran into ITC reversal disputes because their discount arrangements were informal or communicated via email rather than a formal contract.

The amendment removes the requirement for a pre-existing agreement. Going forward, a post-sale discount can be excluded from taxable value as long as the supplier issues a credit note and the recipient reverses the ITC attributable to the discounted portion. The agreement-before-supply condition is gone.

For CA clients in distribution, manufacturing, and FMCG who regularly deal in volume discounts, this simplification reduces one source of GST audit risk. It does require that the ITC reversal by the recipient be done promptly and correctly. Brief buying-side clients that when they receive a credit note from a supplier for a post-sale discount, they must reverse the ITC attributable to that discount in the same period or face the interest exposure.

4. Buyback Income Taxed as Capital Gains

Budget 2026 completes the reclassification of buyback income that began in the previous budget cycle. Buyback income is now taxed as capital gains in the hands of shareholders. This applies to all types of shareholders, including retail investors, HNIs, promoters, and corporate holders.

The effective rate depends on the shareholder's category: approximately 22% for corporate promoters and 30% for non-corporate promoters on the buyback gains, accounting for surcharge and cess. For individual retail investors, buyback income is now long-term capital gains (if held more than 12 months) at 12.5% under Section 112A of the Income Tax Act, 2025, provided the shares are listed equity.

The practical impact for clients: if they tendered shares in a buyback offer in FY 2025-26 or are planning to do so in FY 2026-27, the tax treatment is different from dividends (which are taxed at slab rates) and different from the previous buyback tax (which was levied on the company, not the shareholder). Clients who assumed buyback income is tax-free in their hands, because the company paid the buyback tax, will need to be corrected. The company-level buyback tax no longer applies; the shareholder is now responsible.

This intersects with capital gains planning and the AIS reconciliation process. Buyback proceeds will appear in AIS. Clients will see large figures and may not understand the split between cost of acquisition and taxable gain. Walk them through the calculation. For the broader reconciliation workflow, see Form 16 vs 26AS vs AIS: A CA's Reconciliation Checklist.

5. STT Rates Revised for Futures and Options

Securities Transaction Tax (STT) rates were revised upward for derivatives traders. The rate for futures transactions is now 0.05% (increased from the previous 0.0125%), and for options it is 0.15% on the premium (increased from 0.0625%). This applies to both buyers and sellers of exchange-traded derivatives.

For clients who actively trade in the derivatives segment, this is a significant cost increase. An active derivatives trader executing Rs. 1 crore of notional futures trades per month now pays Rs. 50,000 per month in STT, versus Rs. 12,500 earlier. STT is not a deductible business expense for income tax purposes when computing business income under normal provisions; it is, however, allowed as deductible under Section 36 if the taxpayer is a dealer in securities and the derivatives are part of the ordinary business. Clarify this with derivatives-trading clients.

Additionally, STT paid is allowed as a deduction from capital gains under Section 48 of the new Income Tax Act, 2025 where the derivative position results in a capital gain. For traders who are assessed under business income, the deductibility treatment under the new Act's corresponding provision should be verified as notifications are issued.

For clients who moved from equity mutual funds to direct equity or derivatives after the LTCG rate changes discussed in Capital Gains Tax on Mutual Funds After 2025, the revised STT adds another dimension to the after-tax return calculation.

For a full view of how these changes interact with the updated ITR forms for AY 2026-27, see CBDT's Updated ITR Forms for AY 2026-27: What's New and What Moved.