The new income tax law will come into effect from April 1, 2026, which will affect salaries and business. The main changes include exemption of up to ₹ 15,000 on contributions above Rs 7.5 lakh in PF, tax on company house and vehicle and gift.
The new law will come into effect from April 1, 2026, replacing the decades-old Income Tax Act of 1961. These new rules will have a big impact on salaried employees, middle class and business people. Every taxpayer must know about these 10 big changes:
1. The new law will come into effect from the financial year 2026-27.
The new income tax law will come into effect from April 1, 2026. This means that it will be applicable to you from the financial year 2026-27 and assessment year 2027-28.
2. Tax on contribution more than Rs 7.5 lakh in PF
Now there is a new rule of tax on the contribution made by the company to your retirement funds. If your company deposits more than Rs 7.5 lakh in a year in Provident Fund (PF), National Pension System (NPS) and Superannuation Fund combined, then you will have to pay tax on this extra amount. Not only this, the income from this additional amount will also be taxed.
3. New calculation of tax on the house given by the company
If the company has given you a house to live in, then the tax on it will now be calculated according to the population of the city. For private sector employees it will be like this:
- In cities with population more than 40 lakh: 10% of salary
- In cities with population between 15 lakh to 40 lakh: 7.5% of salary
- Elsewhere: 5% of salary
- If the employee pays any amount as rent, it will be deducted from this amount.
4. If the company has given the house on rent
In big cities, companies often rent flats or houses for employees. In such a case, 10% of the actual rent paid by the company or the employee’s salary – whichever is lower, will be used for tax calculation.
5. Tax on using company car
The new law sets a fixed amount for calculating tax for employees who use company cars for both office and personal purposes:
- For cars up to 1.6 liter engine capacity: Rs 5,000 per month.
- For cars with capacity more than 1.6 litre: Rs 7,000 per month.
- If the company also provides a driver: Rs 3,000 more per month will be added.
6. Now only Rs 15,000 discount on gifts
Tax exemption up to Rs 15,000 will be available only on gifts or gift vouchers received from the company on festivals or special occasions in a financial year. If the value of the gift exceeds Rs 15,000, tax will have to be paid on the entire amount.
7. Up to Rs 200 discount on office meals
Tax exemption on free food provided by the company during office hours will continue. But the condition is that the price of one meal should not exceed Rs 200. This rule will be applicable to all office canteens and meal vouchers.
8. Loan from company
If you have taken a loan up to Rs 2 lakh from your company or have taken a loan for any specific treatment, then there will be no tax on it. But on loans above this amount, tax will be calculated based on the interest rate on similar loans of SBI.
9. Tax-free income investments
The new law has clarified how the expenses related to investments whose income is tax-free will be calculated. For this, 1% of the average annual investment value will be considered as expense. However, this amount cannot exceed the total expenses claimed by the taxpayer.
10. Tax on foreign digital companies also
Foreign digital companies doing big business in India have also been brought under the tax net under the new law. If a foreign company’s transactions with Indian customers exceed Rs 2 crore, or it has more than 3 lakh users in India, then it will have to pay tax in India.