Here’s a detailed look at what is changing.
Income-tax Act, 2025 to replace the 1961 Act
From April 1, 2026, the six-decade-old Income-tax Act, 1961, is scheduled to be replaced by the Income-tax Act, 2025. While tax rates and income slabs are expected to remain unchanged, the new law will modernise the way individuals, companies, and investors calculate taxes, report income, and comply with TDS and TCS rules.
All ongoing assessments, appeals, and proceedings under the old Act are expected to continue until fully resolved.
Single “tax year” to replace FY and AY
The new law will introduce a single “tax year”, replacing the dual system of Financial Year (FY) and Assessment Year (AY). Income earned from April 1 onwards will be reported under this Tax Year, streamlining filing and compliance for taxpayers.
House rent allowance (HRA) – Stricter documentation
HRA exemptions will remain, but stricter rules are set to apply. Employees claiming HRA will need to provide their landlord’s PAN and proof of rent payments. In certain cases, disclosure of the landlord’s details, including PAN and rent paid, is expected to be mandatory.
Additionally, the list of metro cities eligible for 50% HRA exemption will expand to include Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad.
PAN rules to be updated
Aadhaar-only PAN applications will be discontinued, requiring individuals, companies, foreign individuals, and foreign entities to use category-specific forms (Form 93–96).
PAN is also set to become mandatory for high-value transactions, including cash deposits of ₹10 lakh or more per year, vehicle purchases over ₹5 lakh, hotel or event payments exceeding ₹1 lakh, and immovable property purchases above ₹20 lakh.
Share buybacks and capital gains
Proceeds from share buybacks will be taxed as capital gains instead of deemed dividends. Promoter shareholders are likely to face differential rates: 22% for corporate promoters and 30% for non-corporate promoters.
Securities Transaction Tax (STT) changes
STT on equity derivatives is set to rise from 0.02% to 0.05% for futures and from 0.1% to 0.15% for options, affecting active F&O traders.
Sovereign Gold Bonds (SGBs)
Tax exemption on SGB redemption will apply only to bonds purchased in the original issue, while secondary market redemptions will attract capital gains tax.
Dividend and mutual fund income
Interest expenditure deductions will no longer be allowed against dividend or mutual fund income. Investors will be able to submit a single declaration for non-deduction of tax across all mutual fund units, dividends, and bonds.
Property purchase and TDS simplification
Buyers purchasing property from NRIs will be able to deduct TDS using their own PAN, removing the need for a TAN and simplifying compliance.
TCS rationalisation
- Overseas tour packages: flat 2% (down from 5%-20%)
- LRS remittances for education/medical purposes: 2% (down from 5%)
- Alcoholic beverages: 2% (up from 1%)
Motor accident compensation
Interest from tribunal awards in motor accident claims will be fully tax-exempt, with no TDS deducted.
Extended ITR filing deadlines
- Non-audit taxpayers, including businesses and trusts: August 31, 2026
- Salaried individuals: July 31, 2026
- Audit cases: October 31, 2026
Credit card updates from banks
From April 1, high-value credit card payments will be reported to tax authorities for amounts exceeding ₹10 lakh via non-cash methods or ₹1 lakh in cash. PAN will be mandatory for all new credit card applications, and credit card statements up to three months old can serve as address proof for PAN.
Axis Bank: The Airtel Axis Bank Credit Card is set to revise cashback structures, linking them to base cycle earnings. Cashback on Zomato, Blinkit, and District by Zomato transactions will be credited to partner wallets, and four complimentary domestic lounge visits will be discontinued.
YES Bank: Utility and transportation transactions will attract revised charges. Utility payments will incur 1% plus GST only after spending crosses monthly thresholds: ₹1 lakh for Private cards, ₹50,000 for Premium, and ₹25,000 for other cards. Transportation fees will apply beyond ₹75,000/₹50,000, capped at ₹5,000 per transaction.
ATM and UPI withdrawals
HDFC Bank plans to include UPI-based cardless ATM withdrawals in the monthly free limit. Charges of ₹23 plus taxes will apply beyond this limit. Punjab National Bank will revise daily withdrawal limits for select debit cards.
Digital payment security upgrade
The RBI will require two-factor authentication (2FA) for digital transactions, with at least one dynamic factor, such as OTP, biometric verification, or device-based authentication. Banks and fintech firms can implement a mix of biometrics, tokenisation, device binding, or risk-based authentication.
Labour law changes
From April 1, the redefinition of wages, with higher basic pay and dearness allowance, may increase gratuity and retirement benefits but could reduce take-home pay for some employees.
Railway ticket cancellation rules
The Indian Railways is set to tighten its cancellation policy. Passengers cancelling tickets within eight hours of departure may not receive any refund, compared with four hours previously with partial refunds.
Mutual fund brokerage changes
From April 1, GST will be moved outside the Total Expense Ratio (TER), and management fees, STT, and stamp duty will be disclosed separately. This will impact brokerage payouts to distributors.