With the commencement of the financial year 2026–27 on April 1, 2026, the government has rolled out a series of significant reforms in the framework of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). These changes are aimed at streamlining compliance, minimizing procedural complexities, reducing errors and mismatches, and ensuring faster processing of tax credits.
The revamped regime impacts a wide spectrum of financial transactions, particularly those involving foreign remittances, overseas travel, property transactions with non-residents, and investment income. The measures, many of which were proposed in the Union Budget 2026, are expected to benefit taxpayers including NRIs, retail investors, students studying abroad, and frequent international travellers.
One of the most notable changes is the rationalisation of TCS rates on foreign remittances and overseas travel-related expenses. The government has significantly reduced the upfront tax burden in these areas. Foreign tour packages will now attract a flat TCS rate of 2%, replacing the earlier slab-based structure where 5% was levied up to ₹10 lakh and 20% beyond that threshold. Similarly, remittances made for education and medical treatment abroad will now be subject to a reduced TCS rate of 2%, as against the earlier 5% applicable beyond ₹10 lakh. These reductions are expected to ease cash flow pressures for individuals while still maintaining reporting mechanisms for tax authorities.
In another major reform aimed at simplifying cross-border property transactions, the government has relaxed TDS compliance requirements for resident buyers purchasing immovable property from Non-Resident Indians (NRIs). Effective from October 1, 2026, such buyers will no longer be required to obtain a Tax Deduction Account Number (TAN). Instead, quoting the Permanent Account Number (PAN) will suffice for fulfilling TDS obligations. This move is expected to significantly reduce procedural hurdles and make property transactions involving NRIs more efficient and taxpayer-friendly.
Retail investors and small taxpayers will also see a major compliance simplification through the introduction of a unified declaration form. The government has replaced the existing Forms 15G and 15H with a single consolidated Form 121. Previously, taxpayers had to choose between Form 15G (for individuals below 60 years) and Form 15H (for senior citizens) to declare that their total income was below the taxable threshold and request non-deduction of TDS. The new Form 121 eliminates this age-based distinction and provides a single mechanism for all eligible taxpayers to declare nil tax liability and avoid unnecessary tax deductions at source.
The introduction of this unified form is expected to reduce paperwork, eliminate confusion, and improve ease of compliance for both taxpayers and deductors. Upon submission of Form 121, the payer will not deduct tax on eligible income where the taxpayer’s overall tax liability is nil.
It is important to note that the eligibility for such declarations continues to depend on the applicable basic exemption limits. Under the old tax regime, the exemption limit remains ₹2,50,000 for individuals below 60 years and ₹3,00,000 for senior citizens. Under the new tax regime, a uniform exemption limit of ₹4,00,000 applies to all individuals, regardless of age.
Overall, these reforms mark a significant step toward simplifying India’s TDS and TCS framework. By reducing tax rates in key areas, removing redundant compliance requirements, and introducing standardized processes, the government aims to create a more efficient and taxpayer-friendly system while maintaining transparency and reporting discipline.
