Take a look at the major income tax changes effective from April 1, 2026.
Nidhi | Mar 31, 2026 |
Financial Year 2026-27: New Income Tax Changes Applicable from April 1
Starting from Financial Year 2026-27, some major income tax changes are taking place across several areas, such as filing, investment, etc. Let us know about these upcoming changes taking effect from April 1, 2026.
Implementation of New Income Tax Act
One of the key changes includes the implementation of the new Income Tax Act, 2025. This new act replaces the decades-old Income Tax Act, 1961. The new law focuses on simplifying the provisions, removing the unnecessary sections, and easing the compliance for the taxpayers.
No More Confusion Between AY and PY
The terms “Previous Year” (PY) and “Assessment Year” (AY) will be replaced with a single term, “Tax Year”. The previously used terms caused confusion among the taxpayers.
ITR Filing Deadline Changes
The Income Tax Return (ITR) filing deadline for the non-audit cases (ITR-3 and ITR-4) is extended to August 31, giving more time to the self-employed individuals and professionals.
HRA Changes
The rules regarding the House Rent Allowance (HRA) claim have become stricter. Now the employees are required to disclose their relationship to the landlord while claiming HRA. Employers must also submit their landlord’s PAN along with valid proof of rent payments.
Apart from this, the 50% exemption benefit on house rent allowance is now extended to new cities. This benefit was earlier given to cities like Delhi, Mumbai, Kolkata, and Chennai. Now, new cities like Bengaluru, Pune, Ahmedabad, and Hyderabad have also been added.
PAN Changes
Now, Aadhaar alone is not enough to apply for PAN. New forms are introduced for different applicants, such as Form 94 for companies, Form 95 for foreign individuals, and Form 96 for foreign entities.
Apart from this, PAN will be mandatorily required for:
Increased Exemption for Gift and Voucher
The tax-free limit for the corporate gift cards, coupons and vouchers has been increased to Rs 15,000 per employee, up from Rs 5,000. The benefit is for both the old and new tax regimes.
Increase in Children and Hostel Allowance
Starting from April 1, 2026, the income tax rules in India have introduced an increase in tax exemptions for children’s allowances. The children’s education allowance exemption increases from Rs 100 per month to Rs 3,000 per month.
Additionally, the Hostel Allowance increases from Rs 300 per month to Rs 9,000 per month per child (up to two children).
Company Cars Valuation
If your company gives you a car, this change is important for you. There is a significant increase in the taxable perquisite value of employer-provided cards for personal use. These taxable values are as follows:
Single TDS Declaration
Only one form can be submitted for the non-deduction of TDS to avoid TDS on different incomes like dividends, bonds, etc.
Sovereign Gold Bonds (SGBs)
The Sovereign Gold Bonds will be tax-free only if bought during the original issuance. If these are bought from the secondary market, capital gains tax will apply at the time of redemption.
Stock Buyback Tax
Earlier, the stock buybacks were taxed like dividends at the slab rates. Now, they will be taxed as capital gains. As a result, the individual promoters may have to pay around 30% tax, while the company promoters will have to pay 22% tax. Retail investors will pay tax based on the holding period.
Dividend and Mutual Funds
Now, the tax deduction will not be allowed for interest expenses while calculating the income earned from dividends and mutual funds.
Property Purchase from NRIs
Starting from April 1, the buyers can now use their PAN to deduct TDS. There is no need to apply for TAN.
Foreign Travel Spending TCS Relief
The Tax Collected at Source (TCS) on foreign tours has been reduced. Earlier, the TCS rate was 5% to 20%. Now, the rate is Flat 2% on the total cost.
Reduced TCS on Medical and Educational Expenses
The TCS on foreign remittances for education and medical expenses under the Liberalised Remittance Scheme (LRS) has been reduced from 5% to 2%.
Revised Return Deadline Relief
Now you can revise returns till March 31. The earlier deadline was December 31. However, taxpayers must note that late filing after December 31 will attract extra fees.
Motor Accident Compensation
The Interest on motor accident compensation is now fully tax-free from April 1, 2026, and no TDS will be deducted on such interest.
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