Income Tax (No.2) Bill 2026 simplifies tax terms, allows late TDS refunds, and updates dividend deductions and loss rules

The newly passed Income Tax (No.2) Bill, effective April 1, 2026, replaces the Income Tax Act, 1961, simplifying language and reducing complexity by eliminating terms like assessment year and previous year, replacing them with 'tax year.' It allows individuals to claim TDS refunds even if they file income tax returns after the due date, aligning with existing provisions. The bill also exempts TCS on Liberalised Remittance Scheme remittances for education financed by financial institutions and reintroduces deductions on certain inter-corporate dividends for companies opting for concessional tax rates. Amendments include changes to loss carry forward and set-off rules and removal of the beneficial owner reference to align with Section 79. The bill harmonizes definitions related to Micro and Small enterprises and addresses concerns on dividend deductions and associated enterprises, reflecting a taxpayer-friendly approach.