New Delhi, March 20: The Government of India, through the Central Board of Direct Taxes under the Ministry of Finance, has officially notified the Income-Tax Rules, 2026, bringing sweeping changes to the country’s direct tax system effective April 1, 2026. The overhaul simplifies compliance, reduces total rules from 511 to 333, and introduces significant relief for salaried taxpayers.

Expanded HRA Benefits for More Cities

In a major boost for urban professionals, cities like Bengaluru, Hyderabad, Pune, and Ahmedabad have now been classified as “metro” cities for tax purposes. This allows residents in these locations to claim up to 50% House Rent Allowance (HRA) exemption, compared to the earlier 40% cap. However, taxpayers must now disclose their relationship with landlords in Form 124, especially if renting from relatives. India to Implement New Income Tax Rules From April 1: What Taxpayers Need to Know.

Massive Increase in Allowances After Years

The new rules significantly revise long-standing exemption limits to reflect inflation:

  • Meal Vouchers: Increased from INR 50 to INR 200 per meal

  • Children’s Education Allowance: Jumped from INR 100 to INR 3,000 per month per child (up to two children)

  • Hostel Allowance: Raised from INR 300 to INR 9,000 per month

  • Corporate Gifts: Enhanced from INR 5,000 to INR 15,000 annually

These changes mark the first major revision in decades, offering tangible benefits to salaried individuals.

Updated Perquisite and Loan Rules

For employer-provided loans, the tax-free threshold has been increased from INR 20,000 to INR 2 lakh. Loans below this limit or those for medical emergencies will remain exempt. However, company car benefits will now attract higher taxable values, with smaller vehicles valued at INR 5,000 per month (plus INR 3,000 for a driver), and larger cars at INR 7,000. New Income Tax Slabs and Rates for FY 2026-27: How Budget Affects Your Take-Home Salary.

Simplified Compliance and Digital Push

Aligned with the new Income Tax Act, 2025, the updated rules aim to modernize tax administration with fewer forms, improved reporting systems, and stricter PAN-Aadhaar linkage requirements. While benefits are higher under the old tax regime, the reforms are designed to simplify filing for all taxpayers.

Overall, the Income-Tax Rules 2026 signal a shift toward a more transparent, simplified, and taxpayer-friendly system in India.

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(The above story first appeared on LatestLY on Mar 20, 2026 06:22 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).