Taxpayers' ready-reckoner: The changes in FY26 that you need to be aware of

As we move to the new financial year, all of us either as tax payers or otherwise will have apprehensions about the impact of the changes that are introduced during the financial year.

April is also a time when you should review your existing investments and rebalance your portfolio, if necessary. This is required to align tax planning with your financial goals like retirement, children’s education, wedding et cetera. It’s also that time of the year when you pause, get ready for the transition and remember important dates and deadlines.

An understanding of the changes would help you navigate the financial year successfully, maximise tax benefits and ensure compliance. Here is a lowdown on the changes that are going to kick in from April:

Changes in personal taxes

While there is no change in the old tax regime, the finance bill for 2025 has increased tax slabs from six to seven with the highest tax of 30 per cent being applicable on taxable income above Rs 24 lakhs from the existing Rs 15 lakhs. Mind you, the new slabs and rates are applicable on income earned during FY26 and assessed during assessment year FY27.

However, for those under the old regime and claiming deductions under Sec 80 C, it makes sense to pay the entire amount of Rs 1.50 lakhs during April under PPF or Sukanya Samriddhi yojana to get the full benefit of a higher interest for the entire year. 

Individuals opting for the new tax regime, which is the default tax regime with a taxable income up to Rs 12 lakh will have zero tax liability after claiming a maximum rebate of Rs 60,000 under Section 87A.For salaried employees they do not have to pay any tax on income up to Rs 12.75 lakhs since they can claim the standard deduction of Rs 75,000. The finance bill also provides marginal tax relief to all individuals having tax liability up to Rs 12.75 lakhs. The rebate is not available on special incomes having special rates like capital gains or lottery income.

TDS & TCS changes

The threshold limit for tax deducted at source (TDS) on interest on FDs in banks & post office for senior citizens has been increased from Rs 50,000 to Rs 1 lakh and for others from Rs 40,000 to Rs 50,000 under Section 194A.The TDS on dividends from companies and mutual funds has been increased from Rs 5,000 to Rs 10,000 and on rent from Rs 2.40 lakhs to Rs 6 lakhs per year.

If you are a salaried individual, you need to wait for Form 16 from your employer since you need the details of the TDS done while filing your Income tax return (ITR) before 31 July. If your income is other than salary you need Form 16A while filing your ITR. Also, do not forget to download the annual information statement (AIS) to make sure that transactions captured there are covered in the ITR. 

The threshold limit for tax collected at source (TCS) on overseas remittances under the Liberalised Remittance Scheme (LRS) has been increased from Rs 7.50 lakhs to Rs 10 lakhs. TCS on remittance for the purpose of education financed by loan from banks has been waived.

Changes in taxation of ULIPS

The finance bill has also cleared the confusion on taxation of proceeds from Unit Linked Insurance Plans (ULIPs) where the premium paid was more than Rs 2.50 lakhs and where exemption under Section 10 (10D) is not allowed will now be treated as capital assets and taxed as equity-oriented funds which means policy holder has to pay 12.50 per cent tax on long term capital gains. 

Important dates & deadlines

While the ITR filing deadline is usually July 31 for salaried class and September 30 for others, you need to do other related work like downloading bank statements for the year, collecting F 16 or 16A, TDS certificates etc.

Linking Aadhaar & PAN

The government has mandated linking Permanent Account Number (PAN) with Aadhaar. Failing to do so can lead to Increased TDS rates and restrictions on financial transactions. If you haven’t linked it already, you should do it immediately.  

Also watch out for new rules or requirements from banks like changes in minimum balance requirements or KYC (Know Your Customer) norms. The government has also said that UPI IDs linked to inactive mobile numbers will be deactivated for security purposes.