Income Tax Changes from 1st April 2026

The Income Tax landscape is set to change from 1st April.

1. New Income Tax Act, 2025

The existing Income Tax Act, 1961 is proposed to be replaced with the new Income Tax Act, 2025.

• Simpler language
• Reduced litigation
• Better compliance framework

This is a structural change, though practical impact will depend on final implementation.

2. ITR Filing Deadlines Updated

• ITR-1 and ITR-2, 31st July, no change
• ITR-3 and ITR-4, non-audit cases, extended to 31st August
• Tax Audit cases, 31st October, no change

Revised return timeline extended:

• Now allowed till 31st March of next year
• Filing after 31st December will attract additional fees

3. HRA Benefit Expanded

Higher exemption limit of 50 percent now applies to 8 cities:

• Existing, Delhi, Mumbai, Kolkata, Chennai
• Newly added, Bengaluru, Pune, Hyderabad, Ahmedabad

Available only under old tax regime.

4. Children Allowances Increased

• Education allowance increased from Rs 100 to Rs 3,000 per month per child
• Hostel allowance increased from Rs 300 to Rs 9,000 per month per child

Applicable only under old regime.

5. Employer Benefits, Meals and Gifts

• Free meals, Rs 50 to Rs 200 per meal tax-free
• Gifts, Rs 5,000 to Rs 15,000 per year tax-free

This will slightly reduce employee tax burden.

6. Company Car Perquisite Revised

• Small car, Rs 1,800 to Rs 5,000 per month, driver Rs 900 to Rs 3,000
• Big car, Rs 2,400 to Rs 7,000 per month, driver Rs 900 to Rs 3,000

Taxable value has increased significantly.

7. PAN Quoting Rules Tightened

• Vehicle purchase above Rs 5 lakh, PAN required, now includes bikes
• Hotel or restaurant cash bill, Rs 50,000 to Rs 1 lakh
• Property transactions, Rs 10 lakh to Rs 20 lakh
• Cash withdrawal limit reduced from Rs 20 lakh to Rs 10 lakh

8. Buyback of Shares, Major Shift

Earlier:

• Taxed as dividend in hands of shareholder

Now from April 2026:

• Taxed as capital gains

Impact:

• Individuals may face tax around 30 percent
• Companies around 22 percent

This is a significant shift in taxation strategy.

9. Sovereign Gold Bonds (SGB) Taxation

For Sovereign Gold Bonds:

• Exemption on maturity only if purchased at original issue
• If bought from secondary market, capital gains tax will apply

10. Income Tax Forms Renamed

• Form 16 becomes Form 130
• Form 16A becomes Form 131
• Form 12BB becomes Form 124
• Form 26AS becomes Form 168

Only numbering changes, concept remains same.

11. Digital Books Mandatory for Professionals

For professionals like:

• Doctors
• Lawyers
• Chartered Accountants
• Consultants
• Architects

Maintaining physical books will not be allowed. Digital books of accounts will be mandatory.

12. Property Reporting Threshold Increased

• Earlier Rs 30 lakh
• Now Rs 45 lakh

Higher reporting threshold for high-value property transactions.