New Delhi [India], March 31 (ANI): The new Income-tax Act, 2025, set to come into effect from April 1, 2026, marks a comprehensive overhaul of India’s six-decade-old tax framework, with a focus on simplifying compliance, enhancing transparency, and rationalising exemptions for salaried taxpayers.
While tax slabs and rates remain unchanged, the new regime significantly alters the way income, deductions, and disclosures are reported and verified, shifting emphasis towards more accurate and detailed reporting.
Multiple income tax exemption limits are set to be increased under the new rules, particularly benefiting individuals opting for the old tax regime.
One of the key changes pertains to House Rent Allowance (HRA). Currently, taxpayers residing in metro cities such as Mumbai, Delhi, Kolkata, and Chennai can claim exemption of up to 50 per cent of their basic salary, while those in other cities are eligible for 40 per cent.
Under the revised framework, cities like Bengaluru, Hyderabad, Pune, and Ahmedabad have also been included in the higher 50 per cent exemption category, thereby expanding relief to a wider urban population.
However, stricter compliance requirements will accompany these benefits, including the need for more detailed disclosures such as landlord information while claiming HRA exemptions.
The new act also provides for a substantial increase in exemptions related to children’s education. The existing allowance of Rs 100 per child per month is set to be raised to Rs 3,000 per child per month.
Similarly, hostel expenditure allowance will see a sharp jump from Rs 300 per child per month to Rs 9,000 per child per month. These benefits will continue to apply to a maximum of two children and remain available under the old tax regime.
In addition, salaried employees are set to benefit from enhanced meal-related tax exemptions. Under the new Income Tax Rules, 2026, the tax-exempt limit for employer-provided meals has been increased from Rs 50 per meal to Rs 200 per meal.
This change could translate into an annual tax benefit of up to approximately Rs 1.05 lakh, depending on usage and employer policies, and is expected to be available under both old and new tax regimes.
The exemption limit on gifts received from employers is also proposed to be increased threefold, from the current Rs 5,000 annually to Rs 15,000 per year, with this benefit applicable across both tax regimes.
On the compliance front, a major procedural change includes the replacement of Form 16 with a new system-generated Form 130, aimed at improving accuracy and standardisation in tax reporting.
Additionally, expanded use of PAN and tighter reporting norms will require taxpayers to disclose financial information more comprehensively.
It is believed that these revisions are designed to align exemption limits with current cost structures and inflationary trends, which have rendered many existing thresholds outdated. The broader objective is to ease the tax burden on salaried individuals while modernising the tax administration system.
The new provisions will come into force from tomorrow, i.e Wednesday April 1, 2026, marking a significant shift in personal income tax structuring in the country. (ANI)