The New Tax Code — What Is Actually Changing

Nothing much!  You are not paying more tax. Rates, slabs and surcharges are all staying exactly where they are.  

Here is  what’s changing :

Income Gets a New Calendar Label

From April 2026, income will be tracked under a Tax Year (TY). So, FY 2026–27 simply becomes TY26-27. It removes a lot of the back-and-forth confusion from the old labelling system. Income earned before April 1, 2026, stays under the old law, everything after falls under the new one.

Say Goodbye to Form 16, Hello to Form 130

If you are salaried, Form 16 has been your go-to tax document for years. It’s being replaced by Form 130. It breaks down your salary structure, exemptions, deductions, total taxable income and net tax payable, all in one clean document. It can only be downloaded from the traces portal ,after your employer has filed quarterly TDS statements.

PAN Is Now Required for More Transactions

The government is widening the areas where PAN is mandatory, including cash transactions above ₹10 lakh, hotel or event bills above ₹1 lakh, vehicle purchase and property deals above ₹20 lakh.  

The Allowances Are Finally Being Updated

Several allowances that hadn’t been revised in decades are getting a meaningful update:

HRA — Metro city residents in Bengaluru, Hyderabad, Pune and Ahmedabad now qualify for a 50% salary exemption, up from 40% apart from Mumbai, Delhi, Chennai & Kolkatta.

Children’s education allowance — Raised from ₹100 to ₹3,000 per month per child

Hostel expenditure allowance — Raised from ₹300 to ₹9,000 per month per child

Employer Provided Benefits

If your employer offers perks, here is  what the new code says:

• Meal vouchers up to ₹200 per meal are tax-free a
• Gifts on ceremonial occasions up to ₹15,000 remain non-taxable.
• Interest-free loans above ₹2 lakh may be treated as a taxable perk, calculated using SBI’s lending rate.
• Personal expenses on a company credit card will be added to your income unless clearly work-related.
• Company car valuations have been revised. If the employer owns the car and covers expenses, the taxable value is ₹5,000/month for engines up to 1.6 litres and ₹7,000/month above that, plus ₹3,000 if a chauffeur is provided. If the employee bears the running costs, it drops to ₹2,000 and ₹3,000, respectively.
• Gratuity, voluntary retirement compensation and leave encashment at retirement all remain tax-free within prescribed limits.
• Transport allowances for differently abled employees also continue to be fully exempt, no changes there.

Date: March 26, 2026