New Tax Rules from April 1: From April 1, 2026, several major changes in income tax rules will come into effect under the new Income Tax Act 2025. These changes will impact salary earners, small businesses, and investors across India.

Tax experts are advising taxpayers to take note of these updates to avoid penalties and plan their finances efficiently.

According to tax expert Sunil Garg, “The new tax regime has been simplified to make it easier for taxpayers to access their benefits. For salaried employees, the government has made several changes, including the option to choose between the old and new tax regimes every year.”

One of the key benefits is the expansion of House Rent Allowance (HRA) exemptions. Previously, HRA benefits were available only in four cities, but now the list has increased to eight, including Pune and Ahmedabad. “This change is aimed at providing more relief to employees paying rent in different urban areas,” said Garg.

In addition to HRA, allowances for children’s education and hostel expenses have been increased. Employees can now claim up to Rs 16,000 per year for two children’s education, and hostel allowances have been raised from Rs 0 to Rs 9,000 per month. Garg added, “These changes significantly increase the deductions available to employees and can reduce taxable income if planned correctly.”

Taxpayers are advised to complete some important tasks before March 31, 2026. “If you haven’t paid your advance tax, you should do so now. Otherwise, interest under section 234B will apply from April 1,” Garg said.

Salary earners must also submit their declaration forms to employers to indicate their choice of tax regime. For those who have received notices under the National e-Assessment Scheme (NAS), updated filings must be completed by March 31, 2026. Garg emphasised, “Filing on time will help taxpayers avoid higher penalties in the new assessment year.”

Vivek Jalan, Partner at Tax Connect Advisory, highlighted changes related to cash withdrawals. “From April 1, any cash withdrawal above Rs 1 lakh from a bank account will require the PAN number. Banks will report these transactions to the Income Tax Department,” he said. Jalan added that taxpayers should maintain proper records of income and withdrawals to avoid scrutiny.

Small businesses and self-employed professionals will also face changes in TDS (Tax Deducted at Source) rules. Jalan explained, “Sections 194C, 194H, 194J, and 192 have been revised, and now TDS compliance will be simpler for employers and businesses. However, small traders must ensure careful implementation from April 1.”

Changes in Securities Transaction Tax (STT) will impact derivatives like futures and options. “The adjustment is minor, about 0.1 per cent, but it is relevant for those dealing with high-risk instruments,” said Garg.

Investors in Sovereign Gold Bonds (SGBs) will see changes in taxation. “If you redeem your bonds before the final maturity period, capital gains tax will apply. However, there is no tax if the bonds are held until maturity,” Garg said.

Experts also advise taxpayers to review their equity or mutual fund investments before April 1 to optimise tax planning. “If you have short-term capital gains in FY 2025-26, you will have to pay 20 per cent tax. If you have losses, book them before March 31 to offset gains. Similarly, long-term capital gains up to Rs 1,25,000 are exempt; beyond that, 12.5 per cent tax applies,” explained Garg.

The government has revised rules for share buybacks and dividends. Garg noted, “Promoter shareholders will pay 30 per cent tax, while other shareholders will pay 12.5 per cent long-term capital gains tax. Dividend interest exemptions for business purposes have been removed, making tax planning more important.”

To prevent misuse of HRA claims, the government now requires proof of ownership from landlords. Garg explained, “Taxpayers must provide PAN numbers of property owners. Any false claim may attract penalties. Genuine claims will continue to get benefits, but proper documentation is essential.”

Tax benefits under NPS and PPF remain largely unchanged. Jalan said, “Employer contributions to NPS are eligible for deductions up to 14 per cent of basic salary under the new regime. Employees can contribute up to Rs 1.5 lakh per year to NPS, which qualifies for additional Section 80C deductions.”

Experts urge taxpayers to take these steps before the financial year ends:

• Pay any pending advance tax to avoid interest charges.
• Submit income and declaration forms to employers.
• Ensure PAN and bank records are updated for large cash withdrawals.
• Book capital gains or losses in equities before March 31 for better tax efficiency.
• Maintain proper documentation for HRA and other allowances.

Garg summarised, “The government has tried to simplify tax compliance, but taxpayers must be aware of deadlines, documentation, and new rules. Planning now can save money and prevent legal complications later.”

Jalan added, “With these changes, financial planning has become more important than ever. Salary earners, small businesses, and investors should review their portfolios and tax filings carefully before April 1.”