New Income tax law to take effect from April 1: Key changes and what you need to know

AYoung Income assess move testament amount into force from April 1, 2026, replacing the existing law that has been in place for the past six decades. The Income-tax Act, 2025, will take effect from Wednesday, replacing the Income-tax Act, 1961. The new Act aims to present the same tax policy in a more simplified, logical, accessible, and reader-friendly format, while also enhancing transparency and rationalising exemptions for salaried taxpayers.Notably, tax slabs and rates will remain unchanged; however, the new law will significantly alter the way income, deductions, and disclosures are reported and verified, with a greater emphasis on accurate and detailed reporting.Take a look at the changes that will kick in under the new income tax act law:Single ‘Tax Year’ introducedThe new Income Tax Act, 2025 will remove the confusion between ‘previous year’ and ‘assessment year’. Instead, there will only one term used called ‘tax year’, making the system easier to understand.Higher HRA benefit for more citiesUnder the new act, House Rent Allowance (HRA) rules have been expanded to add more cities. Earlier, only metro cities like Mumbai, Delhi, Kolkata, and Chennai were allowed the exemption of up to 50% of basic salary. With new law in place, cities such as Bengaluru, Hyderabad, Pune, and Ahmedabad have been added in this 50% category. This means more people living in big cities can claim higher tax relief on rent.Also Read: From April 1, HRA rules require disclosure of rent paid to fatherBut stricter rules are in place while claiming HRAWhile HRA benefits have increased, taxpayers will now need to provide more details, such as landlord information, to claim the exemption. Goverment will be keeping a sharp eye in fake rent receipts. This aims to improve transparency.Big increase in children’s Education AllowanceUnder the new act, the tax-free allowance for children’s education has been significantly raised, from ₹100 per child per month to ₹3,000 per child per month, give more financial relief to families.Hostel Allowance also increasedThe Hostel Allowance, meanwhile, has also been sharply increased, from ₹300 per child per month to ₹9,000 per child per month. These benefits will continue to apply for up to two children like they were under the old tax regime.Also Read: ₹50,000 rent must deduct 2% TDS by March 31 to avoid scrutiny and penalties">Income Tax changes 2026: Tenants paying over ₹50,000 rent must deduct 2% TDS by March 31 to avoid scrutiny and penaltiesHigher tax-free limit on mealsThe new law gives more benefit for the salaried class as the exemption on employer-provided meals has been increased, from ₹50 per meal to ₹200 per meal. Depending on usage, this could lead to an annual tax benefit of up to about ₹1.05 lakh. This applies to both old and new tax regimes.Gift exemption from employer increasedThe tax-free limit on gifts received from employers has been raised, from ₹5,000 per year to ₹15,000 per year. This benefit, again, will be available under both tax regimes.Form 16 replaced with Form 130Under the new act, Form 16 will be replaced by a new system-generated Form 130, which is expected to make tax reporting more accurate and standardised.More detailed financial reporting requiredTaxpayers will now have to provide more detailed financial information. The use of PAN will also be expanded, increasing overall compliance requirements.ITR filing deadlines tweakedITR filing deadlines have been slightly revised under the new rules. While salaried individuals filing ITR-1 and ITR-2 will continue to have July 31 as the deadline, taxpayers in non-audit categories, such as those filing ITR-3 and ITR-4, will now get an extended deadline of August 31. This change offers additional time for self-employed individuals and professionals to complete their filings.More time to revise tax returnsTaxpayers will now get extra time to revise their returns. The earlier deadline was December 31 but the new deadline is March 31. However, filing after December 31 will involve additional fees. The deadline for belated returns remains unchanged.Higher STT on F&O TradesAnother major change in income tax is the Budget announcement of higher Securities Transaction Tax (STT) on Futures and Options (F&O) trading. STT on futures contracts will rise to 0.05 per cent from 0.02 per cent, while STT on options premiums and exercise of options will be hiked to 0.15 per cent from the present rate of 0.1 per cent and 0.125 per cent, respectively.Lower TCS on foreign travel and remittancesTCS has been significantly reduced under the new rules, with the rate on overseas tour packages cut from 20% to 2%. Similarly, TCS on remittances made under the Liberalised Remittance Scheme (LRS) for medical and education purposes has been lowered from 5% to 2%. This move is aimed at easing the financial burden on the middle class.(With inputs from ANI and PTI)