Income Tax Rules 2026: Will income tax slabs change from April 1? All questions answered

The Union Finance Ministry has notified the draft Income Tax Rules, 2026, which will come into effect from April 1.

The rules will make it possible for the new Income Tax Act, 2025, to come info effect, replacing the 1961 Act. The rules, among other things, are set to overhaul the procedural and compliance systems under direct taxation.

The Income Tax Act, 2025, simplifies the tax timeline by doing away with the distinction between the assessment year and the previous year, replacing it with a single 'tax year' framework. It also allows taxpayers to claim tax deduction at source (TDS) refund even when income tax returns (ITRs) are filed after deadlines, without any penal charges.

The newly notified rules align closely with the draft rules released earlier this year, maintaining the core structure aimed at simplifying compliance and digitisation. The rules, however, do not introduce any new taxes. They focus on tightening compliance, strengthening disclosures and expanding the use of digital reporting systems.

Here are some of the key changes:

Timelines to file I-T returns

The Union Budget 2026 has extended the deadline for filing income tax returns (ITR-3 and ITR-4 for non-audit taxpayers) till August 31 from the end of the relevant tax year.

HRA exemption

One of the major changes affects salaried employees claiming the House Rent Allowance (HRA) exemption. Under the new rules, the list of cities that qualify for higher HRA exemption limits is bigger. Unlike only a few metro cities that were eligible earlier, now, eight cities qualify for the higher limit. They are Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru.

Disclosing relationship with landlord

A key compliance change is the requirement to disclose the relationship with the landlord. Under the new rules, employees claiming HRA must fill Form no. 124 and provide details of their relationship with the landlord when rent is paid, especially where the landlord is a relative.

Paying rent to a relative, such as parents, is still allowed under tax law. But under the new rules, tenants must declare their relationship with the landlord and ensure corresponding rental income is reported by the landlord on their tax returns.

Current tax slabs remain in place

Despite speculation, tax rates under both regimes remain the same as announced in Budget 2026. Tax slabs are typically revised only during the Budget, and no such changes were made this year.

Under the old tax regime:

Income up to Rs 2.5 lakh: 0%

Income up to Rs 5 lakh: 5%

Income up to Rs 10 lakh: 20%

Income above Rs 10 lakh: 30%

Under the new tax regime:

Income up to Rs 4 lakh: 0%

Income up to Rs 8 lakh: 5%

Income up to Rs 12 lakh: 10%

Income up to Rs 16 lakh: 15%

Income up to Rs 20 lakh: 20%

Income up to Rs 24 lakh: 25%

Income above Rs 24 lakh: 30%

The standard deduction under the new tax regime stands at Rs 75,000 for salaried individuals, while under the old regime it remains Rs 50,000.

Changes to PAN application

From April 1, applying for a new PAN card or updating an existing one will require more documents. This change was announced by CSC e-Governance Services India Ltd.