The Ministry of Finance (MoF), on February 1, 2026, issued a detailed set of Frequently Asked Questions (FAQs) explaining key direct tax proposals of the Union Budget 2026–27, categorised under Ease of Living, rationalisation of penalty and prosecution, cooperatives, IT sector support, attracting global investment, and rationalisation of corporate and other direct tax provisions. These clarifications aim to ensure better understanding and smoother implementation of proposed amendments under the Income-tax Act, 2025.
Under the Ease of Living initiatives, the FAQs clarify that interest income awarded by the Motor Accident Claims Tribunal (MACT) under the Motor Vehicles Act, 1988 will be fully exempt from tax when received by an individual or their legal heir. Correspondingly, no TDS shall apply on such interest income, irrespective of amount, when paid to individuals. However, for non-individual recipients, existing TDS provisions will continue to apply. These amendments are proposed to take effect from 1 April 2026.
The FAQs also explain amendments relating to TDS provisions, including inclusion of “supply of manpower” within the definition of “work” to clarify applicable TDS rates, and a simplified electronic procedure for small taxpayers to obtain certificates for lower or nil TDS under section 395. The new process will be rule-based, electronic, and aimed at reducing compliance burden, with all such changes proposed to be effective from 1 April 2026.
