New Delhi The date of April 1, 2026 has been recorded as a major change in the financial history of India. Saying goodbye to the 65 year old ‘Income Tax Act 1961’, the Central Government has now implemented the ‘New Income Tax Act 2025’. The main objective of this new law is to eliminate the complexity of tax rules and make the process completely transparent for taxpayers. With the notification of Finance Act-2026, now old and irrelevant rules have been removed, which is expected to provide great relief to the employees and businessmen.

Now the hassle of ‘Financial Year’ is over, ‘Tax Year’ will be calculated directly.

The most important change under the new law has been made in the method of calculating tax. Till now taxpayers had to juggle between ‘Financial Year’ and ‘Assessment Year’, but now only ‘Tax Year’ will be effective. This simply means that tax will be calculated and paid on the money in the year you earn it. This will significantly reduce paperwork and technical complications.

Huge increase in gifts and children’s allowance: middle class bat-bat

The government has made a big increase in the limit of allowances to please the working class. Now the tax exemption limit on gift vouchers received from companies has been increased from Rs 5,000 to Rs 15,000. Apart from this, there has also been a historic change in the decades old education and hostel allowances. Children’s education allowance has been directly increased from Rs 100 to Rs 3,000 per month, while hostel allowance will now be Rs 9,000 per month instead of Rs 300. This benefit will be applicable in both old and new tax systems.

HRA rules become stricter, 4 new cities get ‘Metro’ status

Now it will not be possible to save tax through fake rent agreements. To claim HRA, it is now mandatory to provide PAN card of the landlord and digital proof of payment. However, there is also good news for tenants. The government has now included Bengaluru, Hyderabad, Pune and Ahmedabad in the list of metro cities. This means that employees living in these cities will now be able to get HRA exemption up to 50% of their basic salary, which was earlier only 40%. Now this benefit will be available in total 8 cities including Delhi, Mumbai, Kolkata and Chennai.

Changes in PAN card rules and an eye on credit cards

The process of making PAN card has also been made more specific. Now PAN will not be generated by merely showing Aadhaar, but new forms (Forms 93 to 96) will have to be filled for different categories. Apart from this, the Income Tax Department is now keeping an eye on your expenses also. If you spend more than Rs 10 lakh online or do cash transactions of more than Rs 1 lakh through credit cards in a year, the information will be directly sent to the department.

Which ITR form is right for you? (Year 2026-27)

Income Tax Department has released the list of new forms for the convenience of taxpayers:

ITR-1 (Simple): For salaried individuals with income up to ₹50 lakh.

ITR-2: For those earning capital gains from stock market or property.

ITR-3: For large businesses and professionals.

ITR-4 (Sugam): For small traders with income up to ₹50 lakh.

ITR-6 and 7: For companies and trusts.