Last Updated on April 1, 2026 12:56 am by INDIAN AWAAZ
For individual taxpayers, a key change is the expansion of House Rent Allowance (HRA) benefits, with Bengaluru, Hyderabad, Pune and Ahmedabad now classified under the 50% exemption category, on par with metro cities
A R DAS
India’s direct tax framework is set for a major transition as the new Income-tax Act, 2025 and provisions of the Finance Act, 2026 come into force from April 1, 2026, requiring both individual and corporate taxpayers to adapt to a revised compliance framework.
The new law replaces large parts of the six-decade-old Income-tax Act, 1961 and is being described as one of the most significant structural overhauls of India’s tax system in decades. The reform aims to simplify tax provisions, reduce legal complexity and improve compliance through clearer language and streamlined rules.
One of the most notable changes is the introduction of a unified “tax year”, replacing the long-standing system of “previous year” and “assessment year.” Under the new framework, income earned between April 1 and March 31 will be assessed within the same tax year, a move intended to reduce confusion and make tax administration easier for both taxpayers and authorities.
The transition will also involve renumbering of sections, forms and procedures, requiring taxpayers, chartered accountants and corporate finance teams to familiarise themselves with the new structure. While the law introduces structural and procedural reforms, tax rates and slabs largely remain unchanged unless modified through annual Finance Acts.
For salaried individuals, some provisions aim to update allowances and compliance norms in line with current economic conditions. Changes affecting salary components, exemptions and reporting requirements may require employers to restructure payroll systems and update documentation during the financial year 2026-27.
Experts say the rollout will likely be phased, with new forms and digital compliance tools being introduced gradually during the transition period to ensure smooth implementation.
The over-six-decades-old Income Tax Act has been replaced by the new Income Tax Act, 2025, from today. It is designed to simplify the tax system by removing outdated provisions, streamlining complex rules and making compliance more straightforward for taxpayers.
All digital payment transactions in the country will be required to meet the norms of two-factor authentication from today as directed by the Reserve Bank of India. The revised FASTag annual pass fee for the financial year 2026-27 will also be in force from tomorrow. The revised rules for applying for or updating a Permanent Account Number PAN card will also come into effect from today.