April 1 is usually a day for jokes. But this year, it also marks the start of something serious, a completely overhauled Income Tax Act. The Income Tax Act 2025, along with the new Income Tax Rules 2026, is now in effect. That means new rules, new forms, and new decisions you’ll have to make about your taxes. The good news is that most of these changes actually work in your favour if you know how to use them.
Here are the 5 changes that matter most for salaried Indians.
1. Your Tax Exemption Limits Have Gone Up
The government has increased exemption limits on a few common allowances, and this is easily one of the biggest positives for salaried employees in the new financial year.
Here’s what has changed:
- Children’s education allowance: from ₹100 per child/month to ₹3,000 per child/month (old regime)
- Hostel expenses: from ₹300 per child/month to ₹9,000 per child/month (old regime)
- Gifts from employer: from ₹5,000/year to ₹15,000/year (applicable in both old and new tax regimes)
If you’re following the old tax regime and have children, these higher limits can lead to noticeable tax savings over the year.
2. HRA Rules Expanded to More Cities
House Rent Allowance (HRA) has always been one of the biggest tax-saving components for salaried employees. And now, the rules have been expanded in your favour.
Earlier, the higher 50% HRA exemption (of basic salary) was limited to just four cities- Mumbai, Delhi, Kolkata, and Chennai.
From April 2026, more cities have been added to this list, including:
- Bengaluru
- Hyderabad
- Pune
- Ahmedabad
For these cities, you can now claim up to 50% of the basic salary as an HRA exemption. For all other cities, the limit continues to remain at 40%.
If you live in cities like Bengaluru or Hyderabad, where rents are already high, this change can help you save more tax under the old regime.
3. PAN Rules Are Getting Stricter
From April 1, 2026, the rules around quoting your PAN (Permanent Account Number) during transactions are becoming stricter. These changes apply to everyone, whether you’re salaried or not.
Here’s what’s changing:
Transaction Type | Old Limit | New Limit (From April 2026) |
Cash withdrawal (bank/post office) | Above ₹20 lakh/year | Above ₹10 lakh/year |
Cash deposit (bank/post office) | Above ₹50,000/day | Above ₹10 lakh/year |
Property transactions | Above ₹10 lakh | Above ₹20 lakh |
Motor vehicle sale/ purchase | All transactions (except 2-wheelers) | Above ₹5 lakh (incl. motorcycles) |
Cash at hotels/restaurants | Above ₹50,000 (one-time) | Above ₹1 lakh |
The government is keeping a closer watch on high-value transactions, especially cash. If you frequently deposit, withdraw, or spend large amounts in cash, you’ll now have to quote your PAN more often and at stricter limits than before.
4. Your ITR Forms Have New Names
If you’ve been filing taxes for a few years, you’re probably familiar with forms like Form 16 or Form 26AS.
From April 2026, these forms are getting new names under the updated tax system. The purpose of these forms remains largely the same; only the numbering has changed.
Here’s a quick look:
Form 16 – Now called Form 130
(Your salary certificate showing TDS and exemptions)
Form 26AS – Now called Form 168
(Your consolidated tax credit statement)
Forms 15G / 15H – Now called Form 121
(Self-declaration to avoid TDS if your taxable income is nil)
This update is mainly an administrative change as part of the broader cleanup under the new tax framework.
5. Old vs New Tax Regime
The biggest question most salaried people have is: Which tax regime should I choose?
The honest answer is: it depends.
It depends on your salary, the city you live in, the exemptions you can claim, and honestly, how much effort you’re willing to put into tracking proofs and receipts.
Here’s the simple difference:
New tax regime – Lower tax rates, fewer exemptions, minimal paperwork
Old tax regime – More deductions and exemptions, but slightly more effort
There’s no clear “winner” anymore. The smarter approach is to calculate your tax under both regimes every year and then choose the one that actually saves you more.
What Should You Do Now?
Instead of reacting at the last moment, a little planning can make a big difference.
Here’s what you can do:
- Compare both tax regimes every year before filing
- Review your salary structure if possible
- Keep track of large transactions
- Maintain proper documents (rent receipts, investment proofs, etc.)
Final Thoughts
At first glance, these changes may seem small, but together they can meaningfully impact how much tax you pay and how you manage your finances.
The smart approach is simple: plan ahead. Compare both tax regimes, keep track of your deductions, and make informed decisions instead of last-minute ones.
