India’s New Income Tax Rules: Changes from April 1, 2026

Starting from 1 April 2026, India introduced a new tax framework replacing the old Income Tax Act, 1961. The new Income Tax Act, 2025 focuses on simplicity, digital compliance, and easier understanding for taxpayers.

1. One Simple Concept – Tax Year

Earlier, taxpayers had to understand two terms: Previous Year (income earned) and Assessment Year (year of filing return).

New System: Only one term will be used now – Tax Year.

Example: Income earned between April 2026 to March 2027 will simply be called Tax Year 2026-27.

2. Simpler Law with Fewer Sections

The earlier Income Tax Act contained more than 800 sections which made compliance complicated for common taxpayers. The new law has reduced provisions to around 536 sections, making tax rules easier to understand and follow.

3. Extended Due Date for Return Filing

Government has provided additional time for certain taxpayers to file their Income Tax Returns.

  • Freelancers & Businesses: Due date extended to 31 August
  • Salaried Individuals: Due date remains 31 July
  • Revision Period: Mistakes can be corrected within 12 months

4. Introduction of Smart Tax Forms

Form 121: New combined form replacing Form 15G and Form 15H for interest income declaration.

Form 168: A digital statement similar to Form 26AS which automatically records income, taxes, and financial transactions.

5. Increase in Allowances

Allowance Old Limit New Limit
Children Education Allowance ₹100 per month ₹3,000 per month
Hostel Allowance ₹300 per month ₹9,000 per month
HRA Benefits Limited cities Extended coverage

6. Reduced TCS on Foreign Remittance

Tax Collected at Source (TCS) on foreign remittance for education and medical purposes above ₹10 lakh has been reduced from 5% to 2%.