Major Income Tax Changes from 1st April 26

Starting 1st April 2026, India's taxation landscape is undergoing a major structural overhaul with the implementation of the Income Tax Act, 2025, which replaces the 1961 Act.

Here's a look at the major income tax rule changes that taxpayers should be aware of in the new tax year.

1. Key Structural & Administrative Changes:-

New Unified "Tax Year": The separate concepts of "Previous Year" and "Assessment Year" are merged into a single "Tax Year".

For example, income earned from April 2026 to March 2027 will simply be referred to as Tax Year 2026-27.

Form Renumbering: All major tax forms have been renamed under the New Income Tax Rules, 2026:

Form 16 (Salary Certificate) is now Form 130.

Form 12BB (Investment Declaration) is now Form 124.

Form 26AS (Tax Credit Statement) is now Form 168.

Form 15G/15H are merged into a single Form 121.

ITR Filing Deadlines:

The deadline for ITR-3 and ITR-4 (non-audit business cases) is extended to 31st August.

The ITR-1 and ITR-2 deadline remains 31st July.

Revised returns can now be filed until 31st March of the next year (extended from Dec 31), subject to a nominal fee.

2. Salaried Employees (Old Tax Regime) Significant hikes in exemption limits have been introduced, primarily affecting those who stick with the Old Tax Regime:-

Children Education Allowance: Increased from ₹100 to ₹3,000 per month per child.

Hostel Allowance: Increased from ₹300 to ₹9,000 per month per child.

Meal Vouchers: The tax-free limit for employer-provided meals (e.g., Sodexo) is now ₹200 per meal, up from ₹50.

HRA Metro Expansion: Residents of Bengaluru, Pune, Hyderabad, and Ahmedabad can now claim a 50% HRA exemption (up from 40% earllier), joining Delhi, Mumbai, Kolkata, and Chennai.

Gift Vouchers: The annual tax-free limit for corporate gifts has increased to ₹15,000.

3. Investment & Market Taxation:-

Share Buybacks: Now taxed as Capital Gains in the hands of the shareholder rather than as "deemed dividends".

STT Hike: Securities Transaction Tax on derivatives has increased:

Futures: 0.02% to 0.05%.

Options: 0.1% to 0.15%.

Sovereign Gold Bonds (SGBs): Exemption on maturity now applies only to original subscribers. Gains on bonds bought from the secondary market will be taxed as capital gains.

Dividend Income: Deductions for interest expenditure (previously up to 20%) are no longer allowed against dividend income.

4. TDS & TCS Rationalisation:-

Lower TCS Rates: TCS on overseas tour packages and LRS remittances (education/medical) is reduced to a flat 2%.

Higher TCS on Alcohol/Scrap: TCS on alcoholic liquor, scrap, and certain minerals is increased to 2%.

NRI Property Sales: Buyers of property from NRIs can now deposit TDS using their own PAN instead of needing a TAN registration.

What Stays the Same?

Income Tax Slabs: There are no changes to the slab rates for FY 2026-27 in either the old or new regime.

New Regime Exemption: Income up to ₹12 lakh effectively remains tax-free under the New Regime (including the Section 87A rebate and ₹75,000 standard deduction).