With the new Income-tax Act, 2025 and the Finance Bill, 2026 coming into effect from April 1, 2026, both individual and corporate taxpayers will have to familiarise themselves with a host of new provisions and compliance requirements. The law brings a comprehensive overhaul, with sections and forms renumbered and the concept of assessment year replaced by tax year.
For individual taxpayers, a key change is the expansion of House Rent Allowance (HRA) benefits, with Bengaluru, Hyderabad, Pune and Ahmedabad now classified under the 50% exemption category, on par with metro cities. The new law also enhances benefits for salaried taxpayers by sharply increasing the Children’s Education Allowance from Rs100 to Rs3,000 per month per child (up to two children), and the Children’s Hostel Allowance from Rs300 to Rs9,000 per month per child, aligning exemptions with current costs.
“New Form 124 seeks additional details for HRA deduction such as the relationship with the landlord and a copy of the rent agreement. Many people who were paying rent to spouses or parents will now come under the government’s scrutiny to check whether the recipient is declaring the rental income,” said Ashish Niraj, Partner at A S N & Company, Chartered Accountants.
For the salaried class, the Act also revises the valuation of perquisites and allowances. The taxable value of employer-provided cars has been significantly increased—from Rs2,700/Rs3,300 per month to Rs8,000/Rs10,000 per month, depending on engine capacity—resulting in a higher taxable salary. However, the exemption for employer-provided gifts has been raised from Rs5,000 to Rs15,000 per annum, offering some relief.
In terms of compliance, Form No. 130 will replace the widely used Form 16 for salary TDS, while multiple property-related TDS forms (such as 26QB and 26QC) have been consolidated into a single Form No. 141.
The Finance Bill, recently passed in Parliament, has also introduced several changes, including shifting buyback taxation from companies to shareholders at applicable income tax rates, along with an additional tax on promoters. It also provides for an extension of the revised return filing timeline, rationalisation of deduction rules for employee welfare fund contributions, and simplification of TCS rates under the Liberalised Remittance Scheme—indicating a broader intent to reduce procedural friction.
For corporates, the transition is more compliance-intensive. A major change under the new Income Tax Act is the overhaul of prescribed forms. “In the context of claiming tax treaty benefits, the requirement of Form 10F has now been replaced by Form 41. The revised form introduces additional data fields, including the requirement to furnish an Indian communication address, thereby increasing the level of detail and accountability in treaty-based claims,” said Gaurav Makhijani, Partner at Makhijani Gera & Associates LLP.
PAN-related forms and tax compliance rules have also been updated with stricter documentation requirements. Businesses will need to review processes and upgrade accounting and ERP systems to ensure accurate data capture, particularly for cross-border transactions.
Further, the Foreign Tax Credit (FTC) framework now requires certification by a chartered accountant, while tax audit and transfer pricing norms demand additional disclosures, including details of foreign payments. In the initial months, dual systems—old and new—may operate simultaneously, increasing the risk of errors such as incorrect reporting periods, use of outdated forms, or wrong tax year selection.
“The organisations need to approach this transition phase as a change-management and technology-readiness exercise rather than a routine year-end compliance task. Starting early, conducting parallel testing, and establishing a clear mapping between old and new forms, rules, sections and reporting fields should be key focus areas,” said Aditi Goyal, Tax Partner at Trilegal.