New Delhi, March 23 India is set to roll out the new Income Tax Act, 2025 from April 1, 2026, but taxpayers need not worry about filing this year as returns can be prepared and filed under the existing Income Tax Act, 1961, officials and tax experts said, ensuring a smooth, year‑wise transition.
The current law will continue to apply for this filing cycle, they said, adding that the government is adopting a clear, phased approach.
Income for FY26 (April 1, 2025–March 31, 2026) will be assessed and filed in AY 2026–27 under the current law, while the new Act will apply only to income earned from FY 2026–27 onwards, experts clarified.
The Central Board of Direct Taxes (CBDT) notified the Income Tax Rules, 2026, introducing a revised framework for allowances and perquisites for salaried employees with some tax relief and tighter compliance.
Key changes in the newly notified rules include higher Housing Rent Allowance (HRA) exemption thresholds with more cities qualifying for the 50 per cent bracket, increased children’s education and hostel allowances up to Rs 3,000 per month and Rs 9,000 per month respectively.
It also raised limits for certain tax‑free benefits such as gifts and meal vouchers; a revised method for valuing perquisites such as company cars. Meanwhile, the rules made documentation and disclosure requirements stricter for HRA and other deductions.
Further, the terms "financial year" and "assessment year" will be replaced with a "tax year" to bring greater uniformity and to improve clarity of the tax framework.
The Income Tax Department’s Draft Income‑tax Rules, 2026 proposed a comprehensive renumbering of tax forms that would improve reporting ease and enhance compliance for taxpayers, professionals, and institutions.
It had new form templates and replaced legacy form numbers that evolved over decades and will reduce ambiguity and duplication in filings for taxpayers, analysts said.
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