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India enacts new Income Tax Act, 2025, from April 2026, revises ITR deadlines, tightens HRA and investment tax rules, boosts some employee perks, and changes banking charges.
New Income Tax And Financial Rules From April 1.
New Income Tax And Financial Rules: Starting April 1, 2026, India’s tax and financial system has entered a new phase, with changes in rules related to income tax, investments, foreign spending, banking usage and even travel refunds. Here’s a clear, simple breakdown of what has changed and how it affects you.
A new tax law replaces the old system
The government has rolled out the Income Tax Act, 2025replacing the six-decade-old Income Tax Act, 1961. The aim is to simplify language, remove outdated provisions and make compliance easier.
One big shift is in terminology. The concepts of Financial Year (FY) and Assessment Year (AY) are gone. There is now just one term: ‘Tax Year’. This is expected to reduce confusion, especially for new taxpayers.
ITR deadlines revised
Filing timelines have been tweaked. Salaried individuals using ITR-1 and ITR-2 will still file by July 31. However, non-audit cases such as ITR-3 and ITR-4 now get more time. The deadline has been pushed to August 31. This gives relief to professionals and small business owners.
Also, revised returns can now be filed till March 31 of the next year, instead of December 31 earlier. But late filings after December will attract extra fees.
HRA rules tightened, but metro list expanded
Claiming House Rent Allowance will now require stricter documentation. Employees must submit landlord PAN and proper rent proof.
At the same time, the list of metro cities eligible for 50 per cent HRA exemption has been widened. It now includes Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad.
F&O trading becomes costlier
Derivatives trading will now pinch more. STT on options premium has been increased to 0.15 per cent. Intrinsic value taxation is also raised to 0.15 per cent. Futures trading tax has gone up sharply to 0.05 per cent from 0.02 per cent.
This directly increases trading costs for active market participants.
Company car rules updated
If your employer provides a car, the taxable value has changed. Cars up to 1.6 litres will now be valued at Rs 8,000 per month. Bigger cars will be valued at Rs 10,000. If a driver is included, an additional Rs 3,000 per month will be added to taxable income.
Buybacks now taxed as capital gains
A major shift has been made in how stock buybacks are taxed. Instead of being treated like dividends, they will now be taxed as capital gains. This means taxation will depend on holding period.
Promoters may face effective tax rates of up to 30 per cent. Retail investors will pay short-term or long-term capital gains tax accordingly.
Employee benefits get a boost
Some allowances have been made more generous. Meal card exemption has been increased to Rs 200 per meal from Rs 50. Gift vouchers and coupons are now tax-free up to Rs 15,000 annually, up from Rs 5,000.
Children’s benefits under the old regime have also been raised. Education allowance is now Rs 3,000 per month per child, while hostel allowance is Rs 9,000 per month.
Changes in SGB taxation
Tax benefits on Sovereign Gold Bonds have been tightened. Only bonds bought during the original issue will enjoy tax-free redemption. If you purchased SGBs from the secondary market, capital gains tax will apply at redemption.
Dividend and mutual fund rules tightened
Investors can no longer claim deductions for interest expenses against dividend or mutual fund income. However, compliance has been eased. A single declaration can now be used for non-deduction of TDS across different income sources like dividends, bonds and mutual funds.
Relief in NRI property transactions
Buying property from an NRI is now simpler. Buyers can deduct TDS using their PAN. The earlier requirement of obtaining a TAN has been removed.
Lower TCS on foreign spending
Overseas spending has become slightly cheaper. TCS on foreign tours is now a flat 2 percent, replacing the earlier slab system. Similarly, remittances for education and medical treatment abroad will attract only 2 percent TCS.
PAN rules tightened
Getting a PAN now requires specific forms. Aadhaar-only applications are no longer allowed. PAN is now mandatory for many high-value transactions. These include large cash deposits, expensive vehicle purchases, hotel payments above Rs 1 lakh and property deals above Rs 20 lakh.
Tax relief on accident compensation
Interest earned on compensation from motor accident claims is now fully tax-free. No TDS will be deducted, ensuring full pay-out to claimants.
Changes beyond tax: What affects daily life
Digital payments get stricter
Two-factor authentication is now mandatory for UPI and card transactions. This includes OTPs, PINs or biometric verification. The move is aimed at reducing fraud and improving security.
Train ticket refunds revised
Railway cancellation rules have been tightened. No refund will be given if tickets are cancelled within 8 hours of departure. Earlier, the window was 4 hours. Cancellations between 8 to 24 hours will attract a 50 percent cut. Between 24 to 72 hours, the deduction will be 25 percent.
FASTag annual pass cost increased
The annual FASTag pass now costs Rs 3,075, slightly higher than Rs 3,000 earlier. It remains valid for one year or 200 trips, whichever comes first.
ATM and banking rules changed
UPI-based ATM withdrawals may now count towards free monthly limits. Beyond five transactions, banks may charge up to Rs 23 per transaction. Some banks have also revised withdrawal limits. Even failed transactions due to low balance could attract penalties in certain cases.
April 01, 2026, 10:31 IST
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