India is set to roll out a major tax overhaul from April 1, 2026, as the Income-tax Act, 2025, replaces the six-decade-old law of 1961. While tax rates remain unchanged, the new framework focuses on simplifying language, reducing legal complexity, and making compliance easier in a digital-first system.
‘Tax Year’ Replaces Old FY-AY Structure
One of the biggest changes is the removal of the long-standing distinction between the Previous Year and the Assessment Year. From FY27 onwards, taxpayers will follow a single “Tax Year” concept, making return filing more straightforward, especially for new taxpayers.
The government says this change will cut confusion and streamline timelines across the tax system.
No Change in Tax Slabs, But New Reliefs Continue
Tax rates will remain unchanged and continue to be revised annually through the Finance Act. The new regime also stays the default option. A key relief remains in place, with individuals earning up to ₹12 lakh continuing to pay no tax due to the Section 87A rebate.
Extended Timelines And Refund Flexibility
Taxpayers filing returns after the due date will still be eligible to claim TDS refunds. This move is expected to ease pressure on late filers who earlier lost out on refunds due to delays.
For filing deadlines, salaried individuals will continue to file by July 31. However, those under non-audit categories, including professionals and self-employed individuals, will now have until August 31.
The window for revised returns has also been extended until March 31, giving taxpayers more time to correct mistakes.
PAN Rules Expanded, Cash Limits Tightened
PAN usage has been widened to track high-value transactions more closely. It will now be mandatory for cash deposits or withdrawals above ₹10 lakh annually, property deals over ₹20 lakh, and vehicle purchases above ₹5 lakh.
It will also apply to hotel or event payments above ₹1 lakh and all insurance premium payments, regardless of amount. Cash transaction reporting has been simplified into an annual tracking system, replacing earlier daily monitoring rules.
Boost To Benefits, HRA, And Perquisites Updated
Several employee benefits have been revised to match current costs. Meal allowance exemption has been raised to ₹200 per meal, while gift exemptions have increased to ₹15,000 per year.
HRA rules may now include more metro cities such as Bengaluru, Hyderabad, Pune, and Ahmedabad, allowing higher exemptions for taxpayers in these locations. At the same time, compliance norms like landlord PAN disclosure have been tightened.
Stronger Reporting For Crypto And Property
Crypto transactions will face stricter reporting, with exchanges required to share data with tax authorities to curb evasion. For property, reporting thresholds have been raised from ₹10 lakh to ₹20 lakh, bringing them in line with current real estate values.
Simplicity At The Core: Fewer Rules And Forms
The new law significantly trims the system. Rules have been reduced from 511 to 333, and forms from 399 to 190. Provisions are now organised in a more structured, topic-based format to improve clarity and reduce duplication.
Other Key Changes Across Investments And Transactions
Stock buybacks will now be taxed as capital gains instead of deemed dividends. TCS on foreign travel and remittances has been reduced to 2%, easing the upfront tax burden.
Securities Transaction Tax has been increased for derivatives, which may raise costs for traders. Meanwhile, employer-provided perks like company cars, education allowances, and vouchers have been updated with higher exemption limits.
The Digital Rupee has also been formally recognised as a legal mode of payment under tax law.
Why Old Law Was Replaced
The Income-tax Act of 1961 had become complex after decades of amendments. The new law aims to simplify the system, cut unnecessary provisions, and make compliance easier for taxpayers while supporting modern financial practices.
