From April 1, 2026: How your in-hand salary may change under new Income Tax Act — Check details

The new financial year has begun, and with it, the updated Income-Tax rules have kicked in from April 1, 2026. At first glance, nothing dramatic seems to have changed - tax slabs remain the same. But look closer at your salary slip, and you may notice a shift.

The changes this year are more subtle. They come through allowances, perks, compliance rules and employer restructuring. For many salaried employees, especially those under the old tax regime, this could mean a different in-hand salary even if the overall package stays the same.

No change in income tax slabs, but here’s why your take-home salary still gets impacted

Add Zee Business as a Preferred Source

There has been no change in income tax slabs under both the old and new regimes. This was not revised in Budget 2026, and the latest rules have also kept slabs unchanged.

But that does not mean your take-home pay remains untouched. The government has instead tweaked how salary components are taxed and exempted, which directly affects how much tax you pay.

Rs 100 to Rs 3,000: Big increase in allowances that can boost your in-hand salary

One of the biggest positives this year is the sharp increase in exemptions on common allowances:

• Children’s education allowance jumps from Rs 100 to Rs 3,000 per month per child
• Hostel allowance rises from Rs 300 to Rs 9,000 per month per child
• Meal benefits (like corporate meal cards) now tax-free up to Rs 200 per meal (earlier Rs 50)
• Gift vouchers exemption increased to Rs 15,000 per year

These changes may not look huge individually, but together they can reduce taxable income and slightly improve your take-home salary.

HRA rule change: Bengaluru, Pune, Hyderabad, Ahmedabad employees get higher tax relief

There is also good news for employees living in major cities beyond the metros.

The 50% HRA exemption bracket now includes: Ahmedabad, Bengaluru, Hyderabad and Pune - in addition to Delhi, Mumbai, Kolkata and Chennai.

Earlier, employees in these cities could claim only 40% exemption. Now, higher exemption means lower taxable income and better savings for many.

Transport allowance up to Rs 25,000, but company perks like car, loans now face higher tax

Some allowances have been made more generous:

• Transport allowance (for eligible employees) increased to Rs 25,000 per month from Rs 10,000

At the same time, certain perks are now taxed more strictly:

• Employer-provided low-interest loans will be taxed based on the interest gap
• Loans up to Rs 2 lakh remain tax-free (earlier Rs 20,000 limit)

For company cars:

• Rs 8,000/month tax for smaller engines (up to 1.6 litre)
• Rs 10,000/month tax for bigger cars

This means some employees may actually see higher taxable perks, reducing net take-home.

STT hiked to 0.05% and 0.15%: What April 1 tax changes mean for F&O traders, investors?

If you invest or trade, there is a direct impact:

• STT on futures rises to 0.05% from 0.02%
• STT on options increases to 0.15% from 0.1%

Also:

• Share buybacks will now be taxed as capital gains in investors’ hands
• Promoters face effective tax rates of 22% (corporate) and 30% (non-corporate)

This makes trading and certain investment strategies more expensive than before.

TCS cut to 2% on foreign travel, remittances: Full list of new rates from April 1

Tax Collected at Source (TCS) has been rationalised:

• Overseas tour packages now taxed at 2% (earlier 5%–20%)
• Education and medical remittances under LRS cut to 2%
• Alcohol TCS increased to 2%

This change is aimed at reducing confusion and speeding up refunds.

New labour code impact: Why PF may rise and monthly in-hand salary may fall

Alongside tax changes, proposed labour code rules could also impact your salary.

• Basic pay must be at least 50% of total salary
• This increases provident fund (PF) contribution

Higher PF means better long-term savings, but it also means lower monthly take-home pay, especially for those with large allowance components.

ITR filing 2026: Income Tax Department notifies all 7 ITR forms before deadline

Along with tax rule changes, there is another important update for taxpayers.

The Income Tax Department has notified all seven ITR forms (ITR-1 to ITR-7) for FY 2025–26 even before the new financial year begins. ITR-1 and ITR-4 were notified earlier on March 30, while the remaining forms - ITR-2, 3, 5, 6, 7 - along with ITR-U (updated return) and ITR-V were issued on March 31.

This means taxpayers can start preparing early instead of waiting for forms to be released later.

ITR-1 to ITR-7 Explained: Which income tax return form you should file in FY 2025–26

Choosing the correct form is crucial. Here is a simple breakdown:

• ITR-1 (Sahaj): For individuals with income up to Rs 50 lakh from salary, one house property and other sources
• ITR-2: For individuals/HUFs with income above Rs 50 lakh or capital gains
• ITR-3: For those with business or professional income
• ITR-4 (Sugam): For small businesses and professionals under presumptive taxation

For others:

• ITR-5: For partnership firms, LLPs, AOPs, BOIs
• ITR-6: For companies (except those claiming exemption under Section 11)
• ITR-7: For trusts, political parties, universities and similar entities

What is ITR-U and ITR-V?

• ITR-U (Updated Return): Lets you correct mistakes or file missed returns
• ITR-V: Acknowledgement form used when returns are filed without digital signature and need verification

July 31 deadline ahead: Why early ITR form notification is good news for taxpayers

This early rollout solves a long-standing issue where forms used to be notified late.

Now:

• Taxpayers get more time to prepare documents
• Filing utilities can be updated on time
• Last-minute rush before the July 31, 2026 deadline can be avoided

Income tax changes 2026: What salaried employees should do right now

With both salary rules and filing processes changing, this is the right time to get organised:

• Review your salary structure after April
• Check which tax regime suits you better
• Keep documents ready for FY 2025–26 filing
• Choose the correct ITR form carefully