The new Income Tax Act, 2025 (https://www.incometaxindia.gov.in/income-tax-act-2025) starts today (yes, the 2025 Act begins in 2026 – don't ask). I went through the key points and media coverage, here are my takeaways.
TL;DR: Same tax rates, new names, HRA now better for four more cities, the old regime gets quiet upgrades for parents with kids and meal cards, and Form 16 is now called Form 130. When people think the new regime is the only way, the government wants to make the old regime great again :)
Details:
Forms renamed
- "Financial Year" + "Assessment Year" → just "Tax Year" now.
- Form 16 → Form 130
- Form 26AS → Form 168
- Form 15G + 15H merged into Form 121
- Total forms: 399 → 190. Total rules: 511 → 333.
Why? Every form was tied to a section number. The whole Act got renumbered, so Form 16 (under Section 203) became Section 395, hence the new number 130. Employers will handle the change.
HRA: 4 new cities get 50% exemption
For decades only Mumbai, Delhi, Chennai and Kolkata enjoyed a 50% HRA exemption. From today Bengaluru, Pune, Hyderabad and Ahmedabad join them. If you're on the old regime and renting in any of these cities, ask HR to update before your April salary – it's free money.
Catch: You now have to disclose your relationship with the landlord. Paying rent to your parents is still legal, but the IT department will know, and your parents must show that income in their returns. The "₹15K rent to dad in the same house" era is getting uncomfortable.
Allowances updated from 1962 prices to 2026 prices
Children's education – ₹100/month per child → ₹3,000/month (old regime only)
Hostel allowance – ₹300/month → ₹9,000/month (old regime only)
Meal vouchers – ₹50/meal → ₹200/meal (~₹1.05 L/year) (old regime only)
Corporate gifts/vouchers – ₹5,000/year → ₹15,000/year (both regimes)
So the old regime got better. If you're salaried and can stack:
- 80C: ₹1.5 L
- 80D: ₹25K–₹50K
- NPS 80CCD(1B): ₹50K
- HRA (now 50% in 8 cities): ₹1.5–₹3 L
- Home loan interest: up to ₹2 L
- Meal vouchers: up to ₹1.05 L
- Education + hostel (2 kids): up to ₹2.88 L
- Standard deduction: ₹50K
It may be worth re‑evaluating which regime to pick. But if you've already chosen the new regime you can't switch back for five years.
Stuff that affects investors
- SGBs: Tax‑free maturity only for original buyers. If you bought on the secondary market, capital gains tax applies.
- F&O STT: Futures 0.02% → 0.05%; Options 0.1% → 0.15%. Your breakeven moves.
- Credit cards: Spend over ₹10 L (non‑cash) or ₹1 L (cash) now reported to the IT department. PAN is mandatory for all new cards.
However, if you've already chosen the new regime you can't switch back to the old one for five years. Is that correct? As far as I know you can switch between regimes if you're salaried and not running a business.
Regarding credit cards, is the reporting limit per card or overall across all cards?
I'm planning to buy some US stocks. What steps do I need to take – like declaring foreign assets, filing, etc.? And how are dividends taxed? Thanks in advance.
I'm completely new to taxes and would love to know some legitimate ways to save. My name says I'm not a tax cheat!
Very helpful!
What does it mean that FY and AY are merged into 'Tax Year'? FY is 2025‑2026 and AY is 2026‑27 – what will the combined 'Tax Year' be?
Thanks a lot for taking the time to write this post – very useful.
Wow, Ahmedabad got the HRA benefit too, but Gurugram didn't.
I heard PF contributions have gone up under the new tax laws. Is there any way to reduce it? I'm currently in the new tax regime.
Education fees used to be covered under 80C – are they separate now?