Union Budget 2026: Structural Tax Reforms That Redefine Certainty

MAT Finality, TCS Rationalisation, SGB Recast and the New Income Tax Act, 2025

By Surekha Ahuja

Budget 2026: Reform Over Populism

Union Budget 2026 departs from headline-oriented announcements to deliver structural certainty. Headline tax rates remain unchanged, but amendments effective 1 April 2026 materially alter corporate taxation, overseas remittances, investment taxation, and compliance procedures.

This is not a rate-cut Budget.
It is a certainty-driven, system-strengthening Budget.

Key Amendments at a Glance

• New Income Tax Act, 2025 notified, effective April 2026

• MAT credit creation permanently discontinued after 31 March 2026

• TCS rates rationalised under the Liberalised Remittance Scheme

• Preferential tax treatment for Sovereign Gold Bonds withdrawn

• Targeted compliance relief for small and mid-sized taxpayers

MAT Credit Blockade: Corporate Tax Finality

Amendment:

• No MAT credit accrues for assessment years commencing on or after 1 April 2026

• Existing credits may only be used within remaining 15-year carry-forward period

• MAT rate fixed at 14%, final levy; 22% regime companies can utilise credits up to 25% of regular tax liability

Impact:

• MAT is transformed from provisional to terminal tax

• Corporates must audit legacy MAT credits and plan utilisation before expiry

Comment: Ensure internal systems reflect MAT expiry dates to avoid loss of credits.

TCS Rationalisation Under LRS: Liquidity Restoration

Amendment (Effective 1 April 2026):

• Overseas education & medical remittances: 2% (from 5%)

• Overseas tour packages: 5% (from 20%)

Impact:

• Immediate cash-flow relief for families funding overseas education or medical treatment

• TCS functions as intended: a reporting tool, not a cash-flow lock

Sovereign Gold Bonds: Arbitrage Eliminated

Amendment:

• Interest income now taxable under “Income from Other Sources”

• LTCG on secondary market transfers beyond 3 years taxed at 12.5% with indexation

• Redemption at maturity: limited CG exemption; interest taxable

Impact:

• Aligns SGBs with conventional financial instruments

• Withdraws tax-driven arbitrage

Comment: Review SGB redemption and interest accrual timing to optimise FY27 tax impact.

New Income Tax Act, 2025: Default New Regime

Amendment:

• Income up to ₹12 lakh fully tax-free through rebate

• Progressive slab rates thereafter; maximum 30% for income exceeding ₹24 lakh

• Old regime continues as limited alternative

Impact:

• Simplifies taxation

• Reduces dependency on exemptions

• Provides predictable rates

Comment: Taxpayers must update internal accounting systems and payroll compliance for FY27.

Compliance Relief Measures

• Revised returns permitted until 31 March 2027 (nominal fees)

• One-time filing for Forms 15G/H via depository

• Automated issuance of nil / lower TDS certificates for small taxpayers

• TDS on manpower supply capped

• MACT interest fully tax-free with no TDS

Compliance Timeline & Key Dates

Compliance / Amendment	Action Required	Deadline / Effective Date	Comment / Clarification
MAT Credit Audit	Audit existing credits, plan utilisation	Before 31 March 2026	Legacy MAT credits expire if not utilised
TCS Rationalisation (LRS)	Plan overseas remittances for education, medical, tours	Effective 1 April 2026	Align remittances with new rates
SGB Holdings	Review redemption, interest accrual, and LTCG treatment	FY27 onwards	Plan redemptions and interest realisation for tax efficiency
New IT Act Forms	Update internal systems for filing and compliance	FY27 Q1 (Apr–Jun 2026)	Ensure payroll, TDS, and accounts align with new slabs
Revised Returns	File corrections / updates	Till 31 March 2027	Covers errors, MAT credit adjustment, or SGB impact
Forms 15G/H	One-time depository filing	Till 31 March 2027	Simplified mechanism; must ensure correct PAN details
TDS Compliance	Apply capped TDS on manpower / other provisions	FY27 onwards	Review existing agreements and payroll schedules
MACT Interest	Monitor full tax-free treatment	FY27 onwards	Verify interest disbursed is correctly exempted
Corporate Audit / Filing	Adjust returns for MAT finality, SGB impact, TCS	FY27 compliance cycle	Ensure all adjustments reflected correctly

Market Reaction vs Structural Reality

While markets reacted to unchanged slabs, the real impact lies in structural reforms:

• ₹15,000 crore liquidity unlocked via TCS rationalisation

• Corporate certainty restored through MAT finality

• Litigation risk systematically reduced

This is a system-stability Budget, not a sentiment-driven one.

Final Takeaway

Union Budget 2026 is a multi-year transition blueprint:

• Certainty over concessions

• Finality over deferral

• Neutrality over preference

Taxpayers: Plan in line with settled law.
Professionals: Pivot from optimisation to certainty-led compliance.

Early adaptation ensures structural benefits; delayed action increases compliance burden.

Supreme Court on GST Exports: Education Counselling to Foreign Universities Is Not an Intermediary Service

By CA Surekha Ahuja 

The intermediary controversy ends — the statute finally speaks clearly

Commissioner of Delhi GST v. Global Opportunities (P.) Ltd.

[2026] 182 taxmann.com 881 (SC)

With the dismissal of the Special Leave Petition in Commissioner of Delhi GST v. Global Opportunities (P.) Ltd., the Hon’ble Supreme Court has finally and conclusively settled the GST treatment of education counselling and admission support services provided to foreign educational institutions.

By affirming the Delhi High Court’s judgment, the Supreme Court has put to rest a recurring and misapplied departmental theory that sought to reclassify such services as “intermediary” supplies. The law now stands settled:

Education counselling services rendered to foreign universities on a principal-to-principal basis constitute export of services under the IGST Act and are eligible for zero-rating and refund with statutory interest.

This ruling restores certainty to GST export jurisprudence and realigns administrative practice with the statute as enacted.

The dispute — and why it persisted

The assessee, an education consultancy, provided counselling and admission-related services under direct contractual arrangements with foreign universities. The essential facts were undisputed:

• Contracts existed with foreign educational institutions

• Invoices were raised on overseas universities

• Consideration was received in convertible foreign exchange

• No fee was charged to students

• GST was paid and refund claimed treating the supply as export

The refund was denied solely on the assertion that the assessee acted as an “intermediary”, on the premise that Indian students were involved in the process.

This approach consistently ignored the statutory scheme — an error now conclusively corrected.

Statutory interpretation — applied as Parliament intended

1. Recipient of service: contract and consideration prevail

Under Section 2(93) of the CGST Act, the recipient of a service is the person liable to pay consideration. In the present case, contractual privity and payment obligation rested entirely with the foreign university.

The student, though a beneficiary of the service outcome, was not the recipient in law.

Settled principle: GST recognises legal supply, not economic benefit.

2. Intermediary definition under Section 2(13), IGST Act — strictly construed

An intermediary must:

• Arrange or facilitate a supply

• Between two or more other persons

• Without supplying such service on its own account

The courts correctly held that:

• The assessee supplied services on its own account

• There was no facilitation of a third-party supply

• No supply existed between students and universities arranged by the assessee

Where a service provider supplies services independently to a foreign principal and receives consideration directly, the intermediary definition is statutorily excluded.

Mislabeling such services as intermediary is not interpretation — it is contradiction of the Act.

3. Place of supply governed by Section 13(2), IGST Act

Section 13(2) provides the default rule: the place of supply is the location of the recipient.

Since the recipient was located outside India, the place of supply was outside India.

Repeated attempts to substitute this rule with:

• place of performance, or

• location of students

were rightly rejected as legally untenable.

4. Export of services — Section 2(6), IGST Act fully satisfied

All five statutory conditions were met:

1. Supplier located in India

2. Recipient located outside India

3. Place of supply outside India

4. Consideration received in foreign exchange

5. Supplier and recipient not merely establishments of the same person

The supply therefore qualified as export of services and was zero-rated under Section 16.

5. Refund with interest — a statutory consequence

Once zero-rating is established:

• Refund under Section 54 of the CGST Act is a statutory entitlement

• Interest under Section 56 follows as a matter of law, not discretion

The Supreme Court’s direction to release the refund within a specified period reinforces that delay in refund of export taxes is legally impermissible.

The law as now settled

Counselling, promotion, and liaison services provided to foreign educational institutions on a principal-to-principal basis, with direct invoicing and foreign exchange consideration, are exports of services under GST and cannot be classified as intermediary services.

This position now carries:

• High Court reasoning

• Supreme Court finality

There is no remaining scope for administrative deviation.

A necessary boundary: export protection depends on clean supply segregation

While the law is settled, its benefit applies only where the structure respects GST boundaries.

Key cautions for practitioners and taxpayers:

• Do not mix supplies to foreign institutions and students

• Services rendered directly to students must be:

  • Contractually separate

  • Separately invoiced

  • Treated as domestic taxable supplies

• Contract language must reflect independence, not agency

• Consideration must flow from the foreign recipient, without linkage to student fees

• One invoice should represent one clearly identifiable supply

Courts protect exports — not hybrid or blurred arrangements.

Position before and after the Supreme Court

Aspect	Earlier Department View	Law as Settled
Nature of service	Intermediary	Export of service
Recipient	Student	Foreign university
Place of supply	India	Outside India
Zero-rating	Denied	Mandatory
Refund	Discretionary	Statutory
Interest	Disputed	Automatic

Concluding note

The Supreme Court’s dismissal of the SLP in Global Opportunities restores coherence to GST export jurisprudence. It prevents denial of export benefits through artificial classification and reaffirms that GST must operate within the boundaries drawn by Parliament.

Exports are determined by statute, not perception.
Where supply, consideration, and recipient align with the law, zero-rating must follow.

For education consultancies structured correctly, the intermediary debate now stands conclusively closed.

Budget 2026 Redefines Sovereign Gold Bonds: Exemption Now Exclusive to Primary Subscribers – A Paradigm Shift in Tax Arbitrage

 By Surekha Ahuja, Chartered Accountant & Tax Compliance Consultant

February 2, 2026 | Delhi

In a move that recalibrates the Sovereign Gold Bond (SGB) ecosystem, the Finance Bill 2026 (Clause 35) amends Section 47(1)(x) of the Income Tax Act, 1961, effective Assessment Year 2026-27 (April 1, 2026). What was once a blanket capital gains tax exemption on maturity redemption—for all holders, irrespective of acquisition route—is now ring-fenced for original individual subscribers from the Reserve Bank of India (RBI) who hold continuously till maturity (8 years).

This targeted amendment addresses a decade-long arbitrage: secondary market traders exploiting tax-free exits. For tax professionals advising MSMEs, family offices, and HNIs, the implications ripple across portfolio strategy, liquidity, and fiscal policy intent.

Legislative Anatomy: From Broad Exemption to Narrow Privilege

Under the pre-amendment regime:

• Section 47(1)(x) deemed SGB maturity redemption a non-transfer, exempting capital gains entirely.

• Secondary market buyers (BSE/NSE) holding till maturity mirrored primary gains—tax-free.

Post-amendment (per Budget Memorandum):

"The exemption shall be available only where the Sovereign Gold Bond is subscribed to by a subscriber at the time of original issue and is held continuously until redemption on maturity, for all Sovereign Gold Bonds issued by the RBI from time to time."

Key qualifiers:

• Individual-only: Aligns with SGB Scheme 2015 eligibility.

• Primary acquisition: Direct RBI subscription (not stock exchange).

• Unbroken tenure: No interim transfers.

Secondary/redemption gains now trigger Section 45: STCG (<1 year, slab rates) or LTCG (>1 year, 12.5% sans indexation, per Budget 2024). The 2.5% p.a. interest remains taxable as "Income from Other Sources" (no TDS).

Economic Rationale: Curbing Arbitrage, Prioritizing Policy Goals

SGBs, launched November 2015, mobilized Rs. 72,274 crore across 67 tranches (~146.96 tonnes gold equivalent, RBI data). They substituted physical imports (saving ~$30-40 billion forex annually at peak), offered liquidity via secondary markets, and yielded 2.5% + gold appreciation.

The arbitrage flaw? Investors bought discounted secondary SGBs (trading at 5-10% premiums historically), held to maturity, and pocketed tax-free gains—often 10-15% annualized post-gold rally. This distorted:

• Revenue leakage: Forgone LTCG ~Rs. 500-1,000 crore (back-of-envelope, assuming 20% secondary volume).

• Market dynamics: Inflated secondary premiums, deterring primary uptake.

Government intent: Restore SGBs to their core—long-term gold monetization for CAD control. Data supports: Primary subscriptions dipped to <20% of volume in later tranches amid secondary tax plays.

Strategic Implications for Stakeholders

1. Original Subscribers (Winners)

• No change: Tax-free maturity (e.g., Tranche I matures 2025—already exempt).

• Advisory: Hold firm; ideal for family business succession (gold-linked inheritance, tax-efficient).

2. Secondary Holders/Flippers (Losers)

• Maturity redemption now taxable. Exit strategy:

  Holding Period	Tax Treatment (Post-2026)	Example (Rs. 10L investment, 12% gain)
  <1 year	STCG @ slab (30% bracket)	Rs. 1.2L gain → Rs. 36,000 tax
  >1 year to maturity	LTCG @ 12.5%	Rs. 1.2L gain → Rs. 15,000 tax

• Actionable: Sell pre-maturity if unrealized gains align with slab; reinvest in Gold ETFs (similar tax) or RBI Floating Rate Bonds.

3. Broader Portfolio Impact

• MSMEs/Family Offices: SGBs lose edge over physical gold (storage costs aside). Pivot to diversified gold ETFs or Sovereign Gold Coins for compliance ease.

• International Tax Angle: NRIs lose appeal; DTAA credits limited for LTCG.

• Peer Review Note: Auditors flag secondary SGBs in FY 2025-26 disclosures—reclassify as taxable assets.

Quantitative Edge Lost: Historical SGB returns (gold + 2.5%) averaged 11.5% CAGR (2015-2025). Post-tax for secondary: Nets ~9-10%, parity with ETFs.

Policy Critique: Prudent, Yet Liquidity Risks

Commendable for revenue discipline (projected Rs. 2-3 lakh crore collections, per grapevine), but secondary markets may thin—trading volumes (~Rs. 500 crore/month) could halve, hiking bid-ask spreads. Uniformity via taxation? Partial; primary bias favors institutions over retail.

Recommendation to policymakers: Grandfather existing secondary holdings or introduce partial indexation for long-haul flips.

Forward Path for Advisors and Investors

1. Audit/Compliance: Update client ledgers; disclose secondary SGB intents in ITR-2/3.

2. Portfolio Rebalance: Target upcoming RBI tranches (likely Q1 2026); blend with G-Secs for yield stability.

3. Blog Takeaway: SGBs endure as sovereign havens—but for purists only. Track MCA/RBI notifications for tranche alerts.

In fiscal chess, Budget 2026 checks tax evasion without killing the golden pawn. 

Sovereign Gold Bond Taxation Snapshot (Post-Budget 2026)

Investor Type	Acquisition Route	Holding	Tax Treatment
Original individual subscriber	RBI (Primary)	Till maturity	Capital gains exempt
Secondary market buyer	BSE / NSE	Till maturity	LTCG @ 12.5%
Any investor	Any	< 1 year	STCG @ slab
Any investor	Any	> 1 year (pre-maturity sale)	LTCG @ 12.5%
All investors	Any	Annual interest (2.5%)	Taxable at slab rates

Key Change: Exemption under Section 47(1)(x) now applies only to original RBI subscribers holding continuously till maturity.