New Delhi – India will implement the new Income Tax Act, 2025, starting April 1, 2026, but taxpayers will not need to file returns for the current financial year. Returns can be prepared and filed under the existing Income Tax Act, 1961, officials and tax experts confirmed. This approach ensures a smooth, year-by-year transition to the new legislation.
FY26 Income Assessed Under Current Law
Income earned from April 1, 2025, to March 31, 2026, will be assessed and filed under the current Income Tax Act, 1961, for the Assessment Year 2026-27. The new Income Tax Act, 2025, will only apply to income earned from FY 2026-27 onwards, according to experts.CBDT Announces Revised Rules for Salaried Employees
The Central Board of Direct Taxes (CBDT) has notified the Income Tax Rules, 2026, introducing revisions to allowances and perquisites for salaried employees. These changes include:- Higher HRA Exemption Thresholds: More cities are qualifying for the 50 per cent bracket for Housing Rent Allowance (HRA) exemptions.
- Increased Children's Allowances: Children’s education and hostel allowances have been increased to ₹3,000 per month and ₹9,000 per month, respectively.
- Revised Limits for Tax-Free Benefits: Limits for tax-free gifts and meal vouchers have been revised.
- Perquisite Valuation Changes: A revised method for valuing perquisites, such as company cars, has been implemented.
- Stricter Documentation: Documentation and disclosure requirements for HRA and other deductions have been made stricter.
Streamlined Tax Framework
The new rules will replace the terms “financial year” and “assessment year” with a “tax year” to improve clarity within the tax framework.Simplified Tax Forms
The Income Tax Department’s Draft Income-tax Rules, 2026, proposed a comprehensive renumbering of tax forms. These changes aim to improve reporting ease and enhance compliance for taxpayers, professionals, and institutions. The new form templates replace legacy form numbers, reducing ambiguity and duplication in filings.Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
The information provided is for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Readers are advised to rely on their own assessment and judgment and consult appropriate financial advisers, if required, before taking any investment-related decisions.
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