New income tax rules will come into effect in the country from April 1, 2026. The government has released the draft Income Tax Rules, 2026, which will replace the old Income Tax Act, 1961, with the new Income Tax Act, 2025.
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Income-tax Rules: New income tax rules will be implemented in the country from April 1, 2026. The government has released the draft Income Tax Rules, 2026, which will replace the old Income Tax Act, 1961 with the new Income Tax Act, 2025. These rules were released for public review for 15 days. The new rules are primarily important for salaried employees, middle-class taxpayers, and companies, as they clarify the calculation of salary-related perks, company benefits, and tax on certain incomes.
What are the details?
According to the government, these new rules will come into effect from the financial year 2026-27, meaning their impact will be visible from the assessment year 2027-28. The rules establish several formulas and thresholds based on which tax authorities will determine the taxable value of perks and benefits provided to an employee. Tax experts say this will bring greater transparency to salary-related tax calculations.
What will change under the new rules?
According to the new rules, if a company’s total contribution to an employee’s retirement fund exceeds ₹7.5 lakh per year, the excess contribution will be taxed. This includes the Provident Fund (PF), National Pension System (NPS), and superannuation fund. Furthermore, any earnings above ₹7.5 lakh will also be considered taxable.
Tax rules for company-provided housing, or company accommodation, have also been clarified. For private sector employees, the taxable value will be determined based on the city’s population. In cities with a population of more than 4 million, 10% of the salary will be considered taxable, 7.5% in cities with a population of 1.5 million to 4 million, and 5% in smaller cities. If the employee pays rent to the company, this amount will be deducted from the value.
A fixed amount has also been set for the use of a company car. If an employee uses the company car for both official and personal purposes, the taxable value will be ₹5,000 per month for cars up to 1.6 liters and ₹7,000 per month for cars with engines larger than that. If the company also provides a driver, an additional ₹3,000 will be added. Similarly, gifts or vouchers given by the company will be tax-free up to ₹15,000, but if the amount exceeds this amount, the entire amount will become taxable.
Apart from this, food or beverages provided in the office will be tax-free up to Rs 200 per meal. If the company gives an interest-free or low-interest loan to the employee, then tax can be levied on that too. However, loans up to Rs 2 lakh and loans given for some medical needs will be exempted. Tax experts say that with the implementation of these rules, it will be necessary for the employees to understand and plan their salary structure and the perks they receive in advance, because in the future, their impact can be directly visible on the salary slip and Form-16.
