April 1, 2026 not just signals the start of the new financial year 2026-27, but this time also brings with it a new set of income tax rules. The New Income Tax Rules 2026, based on the Income Tax Act 2025, have several changes that salaried taxpayers should be aware of. Your exemption limits are changing – hence the math behind the choice of the new and old income tax regime is also changing.Beyond that, the language of the Income Tax Act has been simplified and several common sections and forms have been renamed, which is important to know when filing tax returns.According to Kuldip Kumar, Partner, Mainstay Tax Advisors, the use of simpler language and the rearrangement of sections are expected to make the law more streamlined and less complicated for taxpayers. “Taxpayers will now need to familiarise themselves with renumbered sections such as 80C, 80D, etc., which they have long remembered by heart. Greater linkage of information in return forms, along with changes in various reporting requirements, is also set to tighten compliance,” Kuldip Kumar told TOI. The amendments introduced through the Finance Bill 2026, along with the revamp of the Income Tax Rules, 2026—where the limits for several exemptions and deductions have been enhanced—are likely to have a meaningful impact on taxpayers, depending on their individual circumstances, he added.He notes that several changes—such as the enhancement of the free meal limit and the extension of this benefit to those under the new regime, as well and the increase in reimbursement limits for car running and maintenance expenses for employees using their own cars for both official and personal purposes—are expected to reduce the tax burden for the salaried class in general.We take a look at top 10 things salaried taxpayers should know going into the new financial year 2026-27:1. Tax Slabs Remain the SameThe income tax slabs and income tax rates under both the new and old income tax regime remain the same. The old tax regime continues to offer several deductions and exemptions but with higher tax rates at lower income levels, and the new tax regime has almost negligible exemptions but much lower income tax rates at higher income levels.

Old Tax Regime Slabs For Individuals Up To 60 Years of AgeBut while the tax slabs remain the same, several changes in the exemption limits under the old income tax regime may change your decision on which regime to opt for. In certain cases, with higher exemption limits under the new income tax rules, the old regime again becomes lucrative.

New Tax Regime SlabsWe explain that in detail at the end of this article, but first we take a look at the top changes2. Expansion of 50% HRA benefits to more citiesHouse Rent Allowance or HRA is a common exemption availed by taxpayers under the old income tax regime. How is HRA calculated? It’s the least of the three amounts; actual HRA received, rent paid minus 10% of salary, and 50%/40% of salary.So, what has changed under the new income tax rules? The list of metro cities that are allowed for the 50% of salary calculation has been expanded. Earlier, only those living in Delhi, Mumbai, Kolkata, and Chennai could avail the 50% limit. Now, the list includes Bengaluru, Hyderabad, Pune, and Ahmedabad.Parizad Sirwalla, Partner and Head – Global Mobility Services, Tax, KPMG in India calls the move a welcome step, particularly given the rise in housing costs across emerging urban cities. “By bringing cities such as Bengaluru, Hyderabad, Pune and Ahmedabad at par with traditional metros for HRA computation, the proposal provides meaningful tax relief to salaried individuals residing in these locations,” she tells TOI.The tax expert points out that the exemption will continue to be subject to existing conditions such as actual rent paid and salary structure. Taxpayers should therefore review their compensation structure and HRA claims to benefit from the revised provisions, proposed to take effect from 1 April 2026, she advises.Amarpal Chadha, Tax Partner, EY India tells TOI, “The revision in HRA exemption limits is a welcome move to keep pace with inflation. Extending the higher 50% HRA exemption to cities like Bengaluru, Pune, Hyderabad and Ahmedabad from the earlier 40% will meaningfully benefit salaried taxpayers opting for the old tax regime, where housing remains a significant expense.”3. Big Hike In Education, Hostel AllowanceThis one is a relief for parents – both in terms of an increase in education and hostel allowance. Effective FY 2026-27, the exemption limit for children education allowance has been increased from Rs 100 per month per child to Rs 3,000 per month per child.At the same time, for hostel expenditure, the exemption limit has been hiked from Rs 300 per month per child to Rs 9,000 per month per child. These two exemptions can be availed for up to two children.It’s important to note that these exemptions continue to be available only under the old income tax regime.4. PAN Card Quoting RequirementsUnder the new income tax rules, the requirement of quoting your PAN Card has undergone several changes. Below is a list of the changes that you should be aware of:Fundamentally, the changes to PAN usage and application signal a continued push by the government towards ease of compliance, targeted information collection and strengthening the digital tax ecosystem, says Parizad Sirwalla.

By enhancing transaction limits and curtailing the scope of compulsory PAN quoting requirement, such as moving from daily to annual transaction thresholds (e.g. cash deposit/ withdrawal etc.) and increasing the limits for mandatory quoting in specified transactions (such as hospitality/event expenditures, purchase of motor vehicle/ property etc.), the aim is to ease compliance for routine transactions while enabling closer monitoring of high-value activities, she says.“Even the PAN application process has been streamlined e.g. Aadhaar- PAN name mismatch issue potentially addressed by allowing use of initials where name as per Aadhaar has initials etc. Overall changes have been made to collect targeted information in a simplified manner,” she adds.5. Employer Provided Cars: New Perquisite ValuationIn this case, there is a chance of the tax liability for salaried taxpayers increasing. The valuation of perquisites for employer provided cars has undergone a revision. According to KPMG, the monthly taxable value ranges from Rs 2,000 to Rs 7,000 per month, and an additional Rs 3,000 per month is considered in case of a chauffeur being provided. The hiked slabs replace valuations ranging from Rs 600 to Rs 2,400, plus Rs 900 for chauffeur. Hence it would possibly increase the tax liability for employees who avail such benefits.

6. Concept of Tax Year As Against Assessment YearThis is a prominent change, especially when you are filing your tax return. The concept of financial year and assessment year has always caused confusion among taxpayers. That has now been unified to reflect a ‘Tax Year’ which is the year in which you have earned the income that is being taxed. Let’s understand this better with an example:

7. Meal Voucher LimitsIf as a salaried employee, you get meal vouchers then the per meal limit has been a four fold increase. The tax free limit for meals provided by employees has been raised to Rs 200 from Rs 50 per meal. 8. Expanded scope of perquisites and exemptions

Several existing forms have been replaced or consolidated to simplify compliance. For example, Form 130 has replaced Form 16, commonly used as the salary certificate, while Form 124 has substituted Form 12BB, which was used for employee declarations. 9. Filing Revised Tax Return? New Extended Time Lines In PlaceYet another relief for salaried taxpayers is that the deadline to file revised tax returns is proposed to be extended. From the current December 31 of the tax filing year to March 31 of the subsequent year with the payment of a nominal fee. This measure was first announced by FM Nirmala Sitharaman in her Budget speech this year.10. New Vs Old Tax regime Math changes!Finally, the most important takeaway for salaried taxpayers is that with all the revisions in exemption limits under the old income tax regime, you will now have to do fresh calculations to understand which regime reduces your tax outgo – new or old?To understand this better, Amarpal Chadha of EY India shares two sets of calculations with certain assumptions. First is a comparison of tax liability under the old versus new tax regime as per the 1962 Income Tax Act rules. The second is a comparison between the old and new regime with the revised exemption limits as per the new income tax rules.

Assumptions for Table 1:1. The employee is a resident of Bengaluru, Karnataka (with 40% HRA exemption rule) with a cost to the company of Rs 25,00,000 per annum.2. The above calculation is based on Income-tax Act, 1961 read with Income-tax Rules, 19623. Exemption for Children Education Allowance has been availed at Rs 200 per month per child for a maximum of 2 children4. Exemption for Hostel Allowance has been availed at Rs 300 per month per child for a maximum of 2 children

Assumptions for Table 2:1. The employee is a resident of Bengaluru, Karnataka (with the new 50% HRA exemption rule) with a cost to company of Rs 25,00,000 per annum. 2. The above calculation is based on Income-tax Act, 2025 read with Income-tax Rules, 20263. Exemption for Children Education Allowance has been availed at Rs 3,000 per month per child for a maximum of 2 children4. Exemption for Hostel Allowance has been availed at Rs 9,000 per month per child for a maximum of 2 childrenBased on the calculations presented above, a taxpayer is likely to see higher tax savings under the old income tax regime (Income Tax Rules 2026) compared to the Income Tax Rules, 1962 and the New Tax Regime, primarily due to the increase in exemption limits for Children Education Allowance, Hostel Allowance, and HRA. However, the tax outcome may vary depending on the nature and composition of the taxpayer’s salary structure, particularly in light of the higher perquisite valuation for benefits such as car Lease and the enhanced exemption limit for food coupons. Hence, it is wise to make your calculations before deciding on which tax regime to opt for in the new financial year 2026-27.