Mumbai | 31 March 2026

A series of financial and regulatory changes have come into effect from April 1, 2026, marking the beginning of the financial year 2026–27. One of the most notable updates is the introduction of the Income Tax Act, 2025, which replaces the decades-old Income Tax Act, 1961. The new law aims to simplify tax provisions, remove outdated rules, and make compliance easier for taxpayers across the country.

Among the key changes, rules for claiming House Rent Allowance (HRA) have been tightened. Employees are now required to provide their landlord’s PAN details along with proper rent proof, ensuring greater transparency. Additionally, more cities such as Bengaluru, Hyderabad, Pune, and Ahmedabad have been included in the metro category, allowing higher HRA exemptions. Deadlines for filing income tax returns have also been revised, with salaried individuals required to file by July 31, while non-audit cases now have time until August 31.

The government has also introduced changes affecting investments and transactions. Derivative trading has become costlier due to higher Securities Transaction Tax (STT), while stock buybacks will now be taxed as capital gains instead of dividends. Rules for Sovereign Gold Bonds have been updated, limiting tax exemption on redemption to bonds purchased during the original issue. Additionally, income from dividends and mutual funds will now be calculated without allowing deductions for interest expenses on borrowed funds.

At the same time, several measures have been introduced to ease compliance and provide relief. Investors can now submit a single declaration to avoid TDS across multiple income sources, and property buyers dealing with NRIs can use PAN instead of obtaining a TAN. Tax collected at source (TCS) on foreign travel has been reduced to 2 percent, with similar relief for education and medical expenses abroad. PAN rules have also been tightened, making it mandatory for high-value transactions, while interest on motor accident compensation has been made fully tax-exempt.

 New Financial Year Brings Major Tax Reforms: HRA Rules Tightened, Compliance Measures Updated

A series of financial and regulatory changes have come into effect from April 1, 2026, marking the beginning of the financial year 2026–27. One of the most notable updates is the introduction of the Income Tax Act, 2025, which replaces the decades-old Income Tax Act, 1961. The new law aims to simplify tax provisions, remove outdated rules, and make compliance easier for taxpayers across the country.

Among the key changes, rules for claiming House Rent Allowance (HRA) have been tightened. Employees are now required to provide their landlord’s PAN details along with proper rent proof, ensuring greater transparency. Additionally, more cities such as Bengaluru, Hyderabad, Pune, and Ahmedabad have been included in the metro category, allowing higher HRA exemptions. Deadlines for filing income tax returns have also been revised, with salaried individuals required to file by July 31, while non-audit cases now have time until August 31.

The government has also introduced changes affecting investments and transactions. Derivative trading has become costlier due to higher Securities Transaction Tax (STT), while stock buybacks will now be taxed as capital gains instead of dividends. Rules for Sovereign Gold Bonds have been updated, limiting tax exemption on redemption to bonds purchased during the original issue. Additionally, income from dividends and mutual funds will now be calculated without allowing deductions for interest expenses on borrowed funds.

At the same time, several measures have been introduced to ease compliance and provide relief. Investors can now submit a single declaration to avoid TDS across multiple income sources, and property buyers dealing with NRIs can use PAN instead of obtaining a TAN. Tax collected at source (TCS) on foreign travel has been reduced to 2 percent, with similar relief for education and medical expenses abroad. PAN rules have also been tightened, making it mandatory for high-value transactions, while interest on motor accident compensation has been made fully tax-exempt.