New Income Tax Law to come into effect from April 1, filing to be done under the old system this year

March 23, 2026

New Delhi: India is going to implement the new Income Tax Act, 2025, from April 1, 2026, but this year taxpayers need not worry as they will be able to file their returns under the existing Income Tax Act, 1961.

According to officials and tax experts, the government is implementing this change in a phased manner to keep the process simple.

Old system to remain in effect this year

According to experts, income assessment and returns for the financial year 2025-26 (April 1, 2025, to March 31, 2026) will be done under the existing law in the assessment year 2026-27.

The new Income Tax Act will only apply to income earned from the financial year 2026-27, leaving no changes to filing requirements this year.

What changes will the new rules bring

The Central Board of Direct Taxes (CBDT) has notified the Income Tax Rules, 2026, which include new provisions for allowances and benefits for salaried employees.

These include increasing the House Rent Allowance (HRA) exemption limit, including more cities in the 50% category, and increasing children’s education and hostel allowances to ₹3,000 and ₹9,000 per month, respectively.

Furthermore, the limit for tax-free benefits such as gifts and meal vouchers has been increased, and the method of valuing perquisites such as company cars has been changed. Documentation and disclosure requirements for HRA and other exemptions have been tightened.

New Tax Year System and New Forms

Under the new rules, the term “tax year” will be used instead of “financial year” and “assessment year,” simplifying and clarifying the tax system.

The Income Tax Department has also proposed a new format and form numbering system, which will simplify the filing process and reduce confusion.