Changes in income tax regulations are set to come into force from March 2026, bringing revisions that affect salaried employees and taxpayers. The updated framework aims to simplify the filing process while continuing both the old and new tax regimes.
Under the revised system, taxpayers will find the return filing process easier, with provisions allowing previously entered data to be reused instead of completing the entire form each time. The updated forms are also expected to be more straightforward.
Old and New Tax Regimes Continue
Both tax regimes will remain in place. The old system continues to offer higher deductions and exemptions, while the new system maintains lower tax rates but without deductions. Taxpayers will retain the option to choose either method based on their financial planning.
Higher Exemptions on Gifts and Allowances
The exemption limit on gifts and vouchers has been increased to ₹15,000 per year, compared to the earlier ₹5,000. House Rent Allowance (HRA) exemptions, earlier limited to metro cities at 50 percent, will now also apply to cities such as Bengaluru and Hyderabad, while other cities will continue at 40 percent.
The tax-free allowance for meals provided at the workplace has been revised from ₹50 per day to ₹200 per day, offering additional relief for salaried individuals.
Changes in Perquisites and Education Benefits
Tax valuation on small company-provided cars remains above ₹5,000 per month, with higher valuation where a driver is provided. Deductions related to children’s education have been raised, allowing up to ₹3,000 per month per child, while hostel-related exemptions have increased to ₹9,000.
For serious medical conditions, the tax-free limit on company-provided medical loans has been increased to ₹2 lakh, reflecting adjustments in line with rising costs.
Focus on Simplification and Relief
The revised tax rules seek to provide relief to the middle-income group by adjusting allowances and simplifying compliance. With both regimes continuing, taxpayers will have flexibility in selecting the structure that best suits their needs while benefiting from a more streamlined filing process.
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