Tax shake-up 2026: New Act cuts common deductions from April 1
Tax shake-up 2026: New Act cuts common deductions from April 1
A new Income Tax Act kicks in on April 1, 2026, changing deductions like HRA and 80C. Old regime perks for EVs and meal cards linger, but planning remains crucial.
A sweeping overhaul of India’s direct tax framework kicks in on April 1, 2026 with the Income-tax Act, 2025 replacing the long‑running 1961 law. While tax rates are announced as lower, the big shift is in deductions and exemptions—most traditional benefits like House Rent Allowance (HRA) and 80C savings are removed under the new regime, forcing salaried taxpayers to rethink their tax planning.
Two tax paths will exist: the new regime with lower rates but fewer exemptions, and the old regime with the familiar deductions but higher headline rates. New opportunities, such as EV-related perks and expanded HRA, are highlighted under the old rules, but these advantages largely stay accessible only if you stay with the old regime. The catch? You’ll need careful planning to decide which path suits you each year.
The tax landscape also shifts administratively. A single ‘Tax Year’ replaces the old Financial Year and Assessment Year structure to simplify filing. ITR deadlines have been revised: July 31 for salaried and non‑audit cases, August 31 for professionals and non‑audit businesses, and October 31 for companies and audit cases. Form 16 will be replaced by Form 130 from April 1, 2026, serving as the TDS certificate for salaried individuals and pensioners with enhanced disclosures like salary breakup, taxable income computation, deductions, and TDS details.
Other changes eyed to affect take‑home pay include the rollout of Form 130 and higher meal card benefits, along with tighter HRA compliance. These reforms are designed to improve transparency and reduce mismatches, but they require taxpayers and employers to adjust payroll processes and documentation. The bottom line: tax planning becomes even more crucial as you navigate the new regime’s rules.
Across the country, accountants and payroll teams will be monitoring implementation closely. Taxpayers should review their six- to twelve‑month tax planning, compare regimes, and consider professional advice to minimize surprises when the new rules take effect.
