India’s Income Tax Act, 1961, has been replaced by the Income Tax Act, 2025, effective from April 1, 2026, introducing major simplifications and taxpayer-friendly changes. Key updates focus on higher exemptions, rationalized rules, and streamlined compliance for  Tax year 2026-27.

India’s Central Board of Direct Taxes (CBDT) notified the Income Tax Rules, 2026 on March 19, 2026 operational from Tax Year starting from April 1, 2026, replacing outdated 1961 procedures with automated compliance under the new Income Tax Act, 2025. Income Tax Rules reduced from 511 to 333, with fewer forms and structured formats for easier ITR filing.

 For NRIs global income outside India stays tax-free, but India-sourced salary, rent, or business profits face the new slabs and rules—no big hikes, but stricter reporting for bank interest and dividends.

Tax year-Previous Year and Assessment Year

India’s Income Tax Act 2025 introduces major simplifications, most notably replacing the dual “Previous Year” (PY) and “Assessment Year” (AY) system with a single “ Tax Year” –TY concept effective from April 1, 2026.

Major changes in rates are as follows:

New Tax regime enhancements

Income up to Rs.12 lakhs is effectively tax free in the new regime from previous limits of Rs.700,000.  Standard deduction for salaries individurla rises to Rs.75000 from Rs.50000 boosting lesser tax liability.

HRA and perquisite updates

HRA exemptions expand with metro cities now including Bengaluru, Hyderabad, Pune, and Ahmedabad alongside traditional ones, allowing 50% relief. Meal vouchers/perquisites are tax-free up to ₹200 per meal daily, huge increase from prior limits.

PAN rules relaxed for minor transactions like hotel stays under ₹2 lakh, skipping mandatory quotes.

Business and professional wins

Small businesses and professionals enjoy revised presumptive taxation limits for easier compliance on digital transactions, alongside uniform  Tax collected at source(TCS )at 2% across many categories—down from varied rates.  This will reduce admin hassle for importers and firms . Companies see MAT(Minimum Alternate Tax) drop to 14% from 15%; ULIP proceeds over ₹2.5 lakh annual premium now face capital gains tax.

Slab comparison

New slab stays progress with higher Enty level relief.

Investment related

ULIP proceeds from policies with annual premiums over ₹2.5 lakh now attract capital gains tax at 12.5% on long-term gains (held over 1 year), ending full tax exemptions under Section 10(10D) for high-value plans issued after Feb 1, 2021.

Dividend and Audit Rules

Companies must route dividend payouts to non-residents through domestic banking channels for TCS/audit compliance, ensuring tax withholding traceability. Stock exchanges now mandate a 7-year audit trail for all trades, capturing in order-to-execution details for SEBI oversight and fraud detection.

Points to note while filing ITR forms

ITR forms for AY 2026-27 simplify reporting via pre-filled structured data from AIS (Annual Information Statement), reducing manual entry.

New ITR forms for AY 2026-27 (FY 2025-26) feature extensive pre-filling with structured data from AIS, Form 26AS, and TDS statements to minimize manual input and errors. Taxpayers now verify and correct auto-populated fields like salary breakdowns, capital gains, and foreign assets instead of entering data from scratch.

Key Pre-Filling Changes

Form 130 replaces Form 16, auto-generated via TRACES with granular salary details (basic pay, allowances, Perquisites and benefits) aligned to AIS for mismatch-free filing.

ITR-2/ITR-3 schedules use tables for structured reporting of up to 2 house properties, clearer capital gain classification, and carry-forward of prior-year data.

Deductions (80C-80U), TCS/STT, and crypto/foreign income fields pre-populate from banks, mutual funds, and exchanges.

Permanent Residency

Core limits like the 182-day stay rule stay the same. But updates target short visits and “deemed residency” for people with big Indian income.

Both old and new regimes use basic stay criteria: you’re a resident if in India for 182 days or more in the financial year (FY), or 60 days in FY plus 365 days over the prior four years. The 182-day rule is identical pre- and post-2026, with no added conditions.

Key Tweaks for NRIs/PIOs

For NRIs and PIOs, the 60-day rule previously offered flexibility, but from FY 2026-27:

If Indian income (excluding foreign sources) exceeds ₹15 lakh, the 60-day threshold rises to 120 days. 

Deemed residency under Section 6(1A): Indian citizens/PIOs earning ₹15 lakh+ from India, not taxed abroad, become residents even without physical stay.

These curb “treaty shopping” or brief visits triggering residency for global income taxation.  NRIs/PIOs track Indian stay  meticulously—exceeding 120 days with ₹15 lakh+, Indian income risks RNOR status, taxing foreign income too.

NRI Impact

Staying mostly outside India keeps you a Non-Resident Indian (NRI) for tax purposes, unless visits  exceeds the limits and rental income pushes your total Indian earnings over ₹15 lakh. Track your India days carefully for next year’s tax return (TY 2026-27). Even if you become a resident, RNOR status shields foreign income for the first two years—use India-Oman tax treaty (DTAA) to cut double taxation.

Easy ITR-2 Filing

ITR-2 now auto-fills double-tax relief in Schedule TR—just upload your Tax Residency Certificate (TRC) and Form 10F. No manual hassle for foreign income credits. Indian rentals (after 31.2% TDS) pre-populate too, with a smooth 30% deduction claim.

Download your ready-to-file ITR-2 from the e-filing portal by July 31, 2026. Check Annual Information Statement (AIS) first to match credits and avoid errors.

Pick Your Tax Plan

New regime suits low deductions; stick to old for 80C savings or HRA perks. Update bank and income records before filing ITR.

____________________________________________________________