Taxpayers Can File Under Current Law Before New Income Tax Act Takes Effect
Synopsis
As India gears up for the new Income Tax Act, 2025, taxpayers are assured they can continue filing under the existing law for the current year. This strategic approach aims to facilitate a smooth transition while introducing significant changes to allowances and compliance standards.
Key Takeaways
Current law remains applicable for this filing year.
New Income Tax Act applies from FY 2026-27.
Increased HRA and educational allowances.
Stricter compliance requirements for deductions.
Introduction of 'tax year' terminology.
New Delhi, March 23 (NationPress) India is preparing to implement the new Income Tax Act, 2025 starting April 1, 2026. However, taxpayers can rest easy this year as they can continue to file their returns under the existing Income Tax Act of 1961, according to officials and tax professionals, who emphasize a seamless transition year by year.
The current legislation will remain in effect for this filing year, with the government taking a transparent and phased approach to the changes.
Income for the fiscal year 2026 (April 1, 2025 – March 31, 2026) will be reported and filed in the assessment year 2026-27 under the current law, while the new Act will only govern income generated from the fiscal year 2026-27 onward, as clarified by experts.
The Central Board of Direct Taxes (CBDT) has announced the Income Tax Rules, 2026, which introduce an updated framework for allowances and perks for salaried employees, offering some tax relief while enforcing stricter compliance.
Notable modifications in the newly introduced rules include elevated Housing Rent Allowance (HRA) exemption limits, with additional cities qualifying for the 50% threshold. Furthermore, children’s education and hostel allowances have been increased to Rs 3,000 and Rs 9,000 per month, respectively.
The rules also enhance limits for certain tax-exempt benefits, such as gifts and meal vouchers, alongside a revised valuation method for perquisites like company cars. Additionally, documentation and disclosure requirements for HRA and various deductions have become more stringent.
Moreover, the terms "financial year" and "assessment year" will be replaced by a more uniform term, "tax year," to enhance clarity within the tax framework.
The Draft Income-tax Rules, 2026 from the Income Tax Department includes a thorough renumbering of tax forms aimed at improving the ease of reporting and boosting compliance for taxpayers, professionals, and organizations.
These changes introduce new form templates and eliminate outdated form numbers that have evolved over time, reducing confusion and redundancy in filings, according to analysts.
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Point of View
It's crucial for taxpayers to understand that they can continue to rely on the existing Income Tax Act for the current year. This phased approach by the government aims to minimize disruption while introducing essential reforms that improve tax compliance and benefits.
NationPress
9 May 2026
Frequently Asked Questions
When does the new Income Tax Act come into effect?
The new Income Tax Act, 2025 will come into effect on April 1, 2026.
Can taxpayers file using the current tax laws this year?
Yes, taxpayers can file their returns under the existing Income Tax Act, 1961 for this year.
What are some key changes in the new Income Tax Rules?
Key changes include higher HRA exemption limits, increased children's education allowances, and stricter documentation requirements.
What will replace the terms 'financial year' and 'assessment year'?
These terms will be replaced by 'tax year' to provide greater uniformity.
How will tax forms change under the new rules?
The new rules will include a comprehensive renumbering of tax forms to enhance ease of reporting and compliance.
