New Income Tax Rules from April 2026: Single Tax Year, PAN Limits, TCS Cuts Among Key Changes

New Delhi: The Central government is set to roll out a series of changes to income tax rules from April 2026, aimed at simplifying compliance, improving reporting, and aligning taxation with evolving financial practices.

The reforms cover tax structure, exemptions, PAN requirements, capital gains, and filing timelines.

Single ‘Tax Year’ to Replace Old Terms

A major change is the introduction of a single “tax year” concept.

This replaces the earlier system of “previous year” and “assessment year.” Income earned between April 2026 and March 2027 will be treated as Tax Year 2026–27.

Higher Exemptions for Salaried Employees

The revised rules provide relief to salaried taxpayers:

• Children’s education allowance: ₹3,000 per month per child
• Hostel allowance: ₹9,000 per month per child
• Meal vouchers: ₹200 per meal (tax-free)
• Corporate gifts: ₹15,000 annual limit
• Employer-provided medical loans: tax exemption up to ₹2 lakh

Home-to-office commute will no longer be treated as a taxable perquisite.

HRA and Disclosure Norms Tightened

Under the old tax regime, 50% HRA exemption has been extended to cities such as Hyderabad, Pune, Bengaluru and Ahmedabad.

Taxpayers will also need to disclose relationships in rent payments made to parents or spouse under Form 12.

ITR Filing Made Easier

The deadline for filing ITR-3 and ITR-4 (non-audit cases) has been extended to August 31.

Taxpayers can file revised returns within 12 months from the end of the tax year.

A one-time six-month window will also be available for voluntary disclosure of small foreign assets or income.

PAN Rules Tightened for High-Value Transactions

PAN will now be mandatory for several transactions:

• Cash deposits or withdrawals above ₹10 lakh per year
• Property purchases above ₹20 lakh
• Motor vehicles priced above ₹5 lakh
• Cash payments for travel or hotels above ₹1 lakh

TCS Rates Rationalised

Tax Collected at Source (TCS) has been reduced in key areas:

• Overseas remittances for education and medical purposes above ₹10 lakh: 2%
• Overseas tour packages: flat 2%

Changes in Investments and Capital Gains

The rules bring clarity and changes in taxation:

• Share buybacks will now be taxed as capital gains in the hands of investors
• Interest on loans for dividend income will no longer be deductible
• Securities Transaction Tax (STT) increased for derivatives
• Holding period rules clarified for converted securities

Relief for Mutual Fund Reporting

The requirement for mutual fund houses to report investments above ₹10 lakh under SFT has been removed.

However, such investments will still reflect in the Annual Information Statement (AIS).

Simplified Rules for NRI Property Deals

For property purchases from non-resident Indians (NRIs), the requirement of a separate TAN has been removed.

Buyers can now use PAN to deduct and deposit TDS, simplifying the process.

Focus on Simplicity and Compliance

The new rules aim to reduce complexity, improve transparency, and make tax compliance easier for individuals and businesses.

The changes are expected to impact salaried taxpayers, investors, and high-value transaction segments the most.