The new Income Tax Act will come into effect in April. The new income tax rules will impact taxpayers. Meanwhile, a notification has been issued regarding this. Now, the Central Board of Direct Taxes (CBDT) has made significant changes to the services provided to employees. This rule will come into effect on April 1, 2026. It includes changes to many things, from HRA to allowances.

Changes in HRA

Under the old tax system, several cities, such as Mumbai, Delhi, Kolkata, Pune, Ahmedabad, and Bengaluru, benefited from higher HRA exemptions. Residents in these cities could claim up to 50% of their salary as HRA. In other cities, they could claim 40%.

Children's education and allowance

Under the new rules, child expenses and related allowances have been increased. The education allowance for younger children has been increased from ₹100 to ₹3,000 per month.

Tax rules on car use

According to the Income Tax Rules 2026, if an employee uses a car for his personal use or office, the rules have been changed.

Claims for company car or rental car

Those with a 1.6-liter engine capacity will receive ₹5,000 for the employee and ₹3,000 for the driver. Those with engines with a capacity of more than 1.6 liters will receive ₹7,000 for the employee and ₹3,000 for the driver.

New rules on home amenities and use

Salaries for household services such as gardeners and watchmen will be taxed after deducting the amount charged from the employee. Gas, electricity, and water bills will be taxable.

Gifts and Vouchers

If a gift or voucher is worth more than Rs 15,000, it will be taxable.

Eat

Food, other items, and money paid using vouchers issued during working hours are tax-free. The amount must not exceed ₹200. The new tax system allows for food coupons.

Proof required for deduction

According to the new income tax rules, you must provide the necessary proof to avail of tax deductions. You'll need to provide information about deductions for house rent allowance, leave, travel, and interest on house property.

PC: Studycafe