April 1, 2026 is not just another financial year. The entire Income Tax Act, 1961 gives way to the Income Tax Act, 2025. But beyond this structural overhaul, several specific changes will directly impact taxpayers and professionals. Here is your complete checklist.
HRA Exemption: 4 New Metro Cities
Bengaluru, Hyderabad, Pune, and Ahmedabad now join Delhi, Mumbai, Chennai, and Kolkata as metro cities for HRA purposes. Employees in all eight cities can claim up to 50% of salary as HRA exemption — previously these four cities were capped at 40%.
Compliance is stricter too: Form 12BB is replaced by Form 124. Landlord PAN, full address, and relationship declaration are now mandatory.
Children Education Allowance: 30x Increase
Under the old tax regime, the education allowance jumps from Rs 100/month to Rs 3,000/month per child (maximum 2 children). Hostel allowance goes from Rs 300 to Rs 9,000/month. Total annual tax-exempt benefit for two children: up to Rs 2.88 lakh. This is available only under the old regime.
STT Hike for Traders
Futures STT increases from 0.02% to 0.05% — a 150% jump. Options premium STT goes from 0.10% to 0.15%. Options exercise STT from 0.125% to 0.15%. Delivery-based equity remains unchanged at 0.1%.
TCS on Foreign Remittances Reduced
LRS for education and medical above Rs 10 lakh: TCS reduced from 5% to 2%. Overseas tour packages get a flat 2% rate with no threshold — replacing the old tiered 5%/20% structure.
Other Notable Changes
- Sovereign Gold Bonds: Tax exemption on redemption now applies only to bonds purchased at original issue. Secondary market purchases attract capital gains tax
- Share Buyback: Now taxed as capital gains in shareholders' hands (not deemed dividends)
- Meal Vouchers: Tax-free limit increased from Rs 50 to Rs 200 per meal
- ITR Filing: Non-audit ITR-3/4 deadline extended to 31 August. Revised return deadline extended to 31 March
Every professional should review their compliance calendars, payroll systems, and client advisory notes before the first quarter closes. The changes are numerous but manageable with preparation.
Comments (6)
Form 124 replacing 12BB — another form number change to communicate to HR teams everywhere.
Bookmarking this as a client advisory template. Covers everything in one place.
The SGB secondary market change is going to surprise a lot of retail investors.
Children education allowance from Rs 100 to Rs 3000 per month — should have happened years ago.
STT hike is brutal for F&O traders. 150% increase on futures is going to hit hard.
The HRA change alone will save our Bangalore team significant tax. Updating payroll software this week.