Mumbai:
The Income Tax Act 1961 will be replaced with the new Income Tax Act 2025 from April 1, 2026. This will mark a major reform in the tax system of the country. Ahead of this, let’s have a look at key changes that will come into effect from April 1, 2206.
- Tax Year: The government has decided to replace the older dual system of Financial Year and Assessment Year with a single ‘Tax Year’. April 1 onwards, income will be reported under the tax year.
- HRA changes: The rules to avail House Rent Allowance (HRA) have been made stricter. Employees must provide their landlord’s PAN and proof of rent payments to avail benefits.
- PAN rule changes: Starting April 1, 2026, a Permanent Account Number (PAN) will be mandatory if the total amount in a financial year exceeds Rs 10 lakh. Earlier, the rule required a PAN for the deposit of Rs 50,000 per day.
- Also, applying for a PAN with only Aadhaar will no longer be allowed. This means applicants will need to submit additional proof of date of birth, such as a voter ID, birth certificate, passport, or driving licence.
- Capital gains: New rules will replace the previous ‘deemed dividend’ treatment, and therefore proceeds from share buybacks will now be taxed as capital gains.
- Sovereign Gold Bonds: Under the new rule, the tax exemptions will now apply only on redemption of SGBs purchased at the original issue. Secondary market redemptions will attract capital gains tax.
- ITR filing deadline extended: Under the new rule, the ITR deadline for non-audit taxpayers, including businesses and trusts, has been extended to August 31.
- Dividend and mutual fund income: Income from dividends and mutual funds will be calculated without permitting any deduction for interest expenses, regardless of whether the investment was made using borrowed funds.
- Children’s allowances: Children’s education allowance has increased from Rs 100 per month to Rs 3,000 per child.
