Key Changes Take Effect for Income Tax Filers, PAN Holders and Meal Card Users from April 1

India's Income Tax Framework Set for Major Overhaul

Starting April 1, 2026, India's income tax framework is poised to undergo significant changes, introducing structural reforms, simplified terminology, and revised tax implications across various aspects of investments, filings, and foreign spending. The decades-old Income Tax Act of 1961 will be replaced by the Income Tax Act of 2025, aimed at simplifying complex provisions, removing redundant sections, and making compliance easier for taxpayers.

Simplified Terminology and Filing Deadlines

The new law will replace the terms "Financial Year" (FY) and "Assessment Year" (AY) with a single term "Tax Year." This move is intended to reduce confusion, particularly for new taxpayers. Additionally, the ITR filing deadlines have been tweaked:

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The revised deadline of August 31 provides additional time for self-employed individuals and professionals.

Increased Costs for F&O Traders

Trading in derivatives becomes more expensive with an increase in Securities Transaction Tax (STT):

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Stricter Rules for HRA Claims

House Rent Allowance (HRA) benefits will continue, but compliance requirements have become tighter. Employees will now need to submit their landlord's PAN along with valid proof of rent payments. In certain situations, disclosing complete landlord details, including PAN and rent amount, will be mandatory while claiming HRA.

Expansion of Metro Cities for HRA Exemption

The list of metro cities eligible for the higher 50 percent HRA exemption has been expanded to include Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad.

Higher Tax-Free Limit on Meal Cards

The tax exemption on employer-provided meal cards has been increased to Rs 200 per meal, up from Rs 50 earlier. This benefit covers food and non-alcoholic beverages provided by companies and is available under the old tax regime.

Increase in Gift and Voucher Exemption

The annual tax-free limit for corporate gift cards, vouchers, and coupons has been raised from Rs 5,000 to Rs 15,000 per employee. This benefit applies under both the old and new tax regimes.

Enhanced Children's Allowances

Allowances for children have seen a significant jump under the old tax regime. The education allowance has been increased to Rs 3,000 per month per child (from Rs 100), while the hostel allowance has been raised to Rs 9,000 per month (from Rs 300).

Revised Valuation of Company-Provided Vehicles

The taxable value of employer-provided vehicles has been updated under the new Income-tax Act, 2025. Cars with engine capacity up to 1.6 litres will now have a perquisite value of Rs 8,000 per month, while vehicles above 1.6 litres will be valued at Rs 10,000 per month. Additionally, if a driver is provided, the taxable value of the driver's service has been increased to Rs 3,000 per month.

Stock Buybacks Now Taxed Differently

The taxation of stock buybacks sees a significant shift:

• Earlier: Taxed as deemed dividend at slab rates
• Now: Taxed as capital gains

Revised tax implications:

• Individual promoters: ~30 percent effective tax
• Company promoters: ~22 percent
• Retail investors: Taxed as Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG) depending on holding period

Changes in Sovereign Gold Bonds (SGBs)

Tax exemption on redemption of Sovereign Gold Bonds will now be available only if the bonds were purchased during the original issuance. Bonds bought from the secondary market will be subject to capital gains tax at the time of redemption.

Dividend and Mutual Fund Income Rules

Income earned from dividends and mutual funds will now be calculated without allowing any deduction for interest expenses, even if the investment was made using borrowed funds.

Single Declaration for Non-Deduction of TDS

Investors can now submit a single declaration to avoid TDS across multiple income sources, including mutual funds, dividends, and bonds, simplifying the compliance process.

Simplified TDS Rules for Property Purchases from NRIs

For property transactions involving Non-Resident Indians (NRIs), buyers can now deduct TDS using their own PAN. This removes the earlier requirement of obtaining a TAN, making the process more straightforward.

Relief on Foreign Travel Spending

Tax Collected at Source (TCS) on foreign tours has been reduced:

• Earlier: 5 percent up to Rs 10 lakh, 20 percent beyond
• Now: Flat 2 percent on total cost

This significantly lowers upfront tax outgo for international travellers.

Lower TCS for Education and Medical Expenses Abroad

For remittances related to education and medical treatment:

• Earlier: 5 percent on amounts above Rs 10 lakh
• Now: Reduced to 2 percent

More Time to File Revised Returns

Taxpayers now get more flexibility:

• Earlier deadline: December 31 (9 months)
• New deadline: March 31 (12 months)

However, filing after December 31 will attract additional fees. The deadline for belated returns remains unchanged.

Motor Accident Compensation

Interest received on awards from the Motor Accident Claims Tribunal will now be completely tax-exempt. No TDS will be deducted on such interest, ensuring that claimants receive the full amount without any tax liability.

PAN Rule Changes

Applying for a PAN using only Aadhaar is no longer permitted. Applicants must now use category-specific forms, Form 93 for individuals, Form 94 for companies, Form 95 for foreign individuals, and Form 96 for foreign entities.

PAN has been made compulsory for several high-value transactions, including cash deposits of Rs 10 lakh or more in a financial year, purchase of vehicles exceeding Rs 5 lakh, payments above Rs 1 lakh for hotels or events, and immovable property transactions valued above Rs 20 lakh.