The new Income Tax Act 2025 takes effect from April 1, 2026. For the vast majority of salaried employees, the most important reassurance is this: your tax liability does not change. The same tax slabs, the same standard deduction, the same 87A rebate — all continue unchanged.

What changes is the administrative and compliance experience — the forms you fill, how perquisites are valued, the allowances your employer calculates, and how the tax department communicates with you. Here is a complete breakdown.

1. Your Investment Declaration Form Changes

Every April, your HR or payroll team asks you to declare your planned investments for the year — HRA details, 80C investments, home loan interest etc. This was done through Form 12BB.

From April 2026, this form is replaced by Form 124. The information you need to provide is almost identical — but Form 124 has one significant new requirement: if you are claiming HRA for rent paid to a family member (parents, spouse, siblings), you must now declare your relationship with the landlord.

⚠️ HRA to Family Members — New Disclosure Required

If you pay rent to your mother, father or spouse and claim HRA, you must now declare this relationship in Form 124. The department will cross-check whether your landlord-relative has declared this rental income in their ITR. If they have not, your HRA claim may be rejected. Ensure your parents file their ITR and include rental income from you.

2. Allowance Limits — Updated After Decades

Several allowances in the old rules had not been updated since the 1990s, making them effectively useless in 2025. The draft Income Tax Rules 2026 propose significant increases to bring them in line with current costs:

AllowanceOld Limit (per month)Proposed New Limit
Children's Education Allowance₹100 per child₹3,000 per child
Children's Hostel Allowance₹300 per child₹1,000 per child
Transport Allowance (Disabled)₹3,200 per month₹15,000 (metro) / ₹8,000 (others)
Meal Coupon Exemption₹50 per meal₹200 per meal
Gifts and Vouchers from Employer₹5,000 per year₹15,000 per year
Two-Wheeler Perquisite Deduction₹900 per month₹3,000 per month
Interest-Free Loan Exemption Threshold₹20,000₹2,00,000

These are proposals in the draft rules and will be finalised before April 1, 2026. If confirmed, employees with children in school/hostel, those with meal coupons and those receiving employer loans will see meaningful benefit.

3. Perquisite Valuation — More Realistic

Perquisites are non-cash benefits provided by your employer — company car, accommodation, interest-free loans, club memberships etc. Under the old rules, these were valued using rates that were set decades ago and didn't reflect actual market costs. The new rules revise these valuations upward.

For most employees, the practical impact is that some perquisites may now attract slightly higher tax — for example, a company-provided car or accommodation will be valued at closer-to-market rates. Check with your HR about how your specific benefits package will be affected.

4. Form 16 Becomes Form 130

Your annual salary TDS certificate, known as Form 16, will be renamed Form 130. Your employer will issue Form 130 by mid-June 2026 (for income earned in FY 2026-27). The content — your salary breakup, TDS deducted, and employer details — remains exactly the same. Just the form number changes.

5. Form 26AS Becomes Form 168

The Annual Tax Credit Statement (Form 26AS), which shows all TDS deducted against your PAN, will be renamed Form 168. You can continue to access it from the income tax portal. The information it contains — TDS, advance tax, self-assessment tax — remains unchanged.

6. Digital and Faceless by Default

All notices and communications from the tax department will now be sent digitally to your registered email and the income tax portal. If you receive a notice, you can respond entirely online without visiting a tax office. This faceless system, which was introduced for assessments in recent years, is now extended to a wider range of proceedings.

✅ Make Sure Your Email Is Updated on the IT Portal

Since all communications will be digital, ensure your email ID and mobile number are updated on incometax.gov.in. A notice sent to an old email that you no longer check will still be considered served — and failure to respond can attract penalties.

7. ITR Filing — What Changes

The ITR forms are being restructured and renumbered to align with the new Act. ITR-1 (Sahaj), commonly filed by salaried employees, will continue in a simplified new form. The income tax portal will be updated to reflect the new rules and forms from April 2026. The process of filing itself — logging in, entering income details, verifying with Aadhaar OTP — will remain familiar.

Action Checklist for Salaried Employees Before April 2026

🧾 Tax Slabs Are Unchanged — Calculate Yours Now

The New Income Tax Act 2025 doesn't change rates. Use TurboX to calculate your exact tax for FY 2025-26 and FY 2026-27 under both regimes.

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