Outlook Business Desk
Starting April 1, 2026, with the new financial year 2026–27, the updated Income Tax Act takes effect. It mainly revises allowances and corporate perks, with salaried individuals under the old tax regime expected to see the most impact.
Income tax slabs remain unchanged from April 1, as Budget 2026 did not introduce any revisions for either the old or new regimes. Later notifications under the Income Tax Act, 2025, and Income Tax Rules, 2026 also confirmed no updates.
The children’s education allowance has been significantly raised from ₹100 per month to ₹3,000 per month per child. This revision increases tax-exempt benefits for salaried individuals claiming education-related expenses under the old tax regime.
Hostel expenditure allowance has also increased from ₹300 per month to ₹9,000 per month per child. This sharp revision provides greater tax relief to salaried parents managing accommodation costs for their children’s education under the old tax regime.
House Rent Allowance (HRA) benefits now include Ahmedabad, Bengaluru, Hyderabad and Pune, allowing 50% exemption instead of 40% under the old regime. On the other hand, Chennai, Delhi, Kolkata and Mumbai were already eligible for the higher exemption bracket.
Tax-free limits on several employee perks have been increased, including ₹200 per meal for employer-provided food and ₹15,000 annually for gift vouchers. Transport allowance exemption has also been raised to ₹25,000 per month or 70%, whichever is lower.
Low-interest or interest-free corporate loans will now be taxed based on the difference from State Bank of India (SBI) lending rates. However, loans below ₹2 lakh and those for medical emergencies remain exempt from taxation.
Tax on employer-provided vehicles has been increased to ₹8,000 per month for smaller engines and ₹10,000 for larger ones. STT on futures rises to 0.05% and on options to 0.15%, while share buybacks will now be taxed as capital gains.
Meanwhile, changes in TCS rates reduce tax on overseas spending, tour packages and remittances for education and medical needs, while increasing tax on alcohol. New labour codes may lower take-home salary as higher basic pay increases provident fund contributions.