The Income Tax Act, 2025 officially replaces the 64-year-old Income Tax Act, 1961. Designed to modernize India’s direct tax infrastructure, the new legislation condenses over 800 scattered sections into just 536 logically grouped sections, drastically simplifying compliance, reducing litigation, and standardizing digital operations.
1. The "Tax Year" Concept
2. Tax Regimes and Slabs (Budget 2026)
3. Major Boosts for Salaried Employees
The Income Tax Rules, 2026 have completely revamped out-of-date perquisite exemptions. The Children’s Education Allowance is increased to ₹3,000/month per child, Hostel Allowance to ₹9,000/month, and tax-free Meal Vouchers are now capped at ₹200/day. Crucially, the 50% HRA Exemption has been expanded beyond the four original metros to now include Bengaluru, Pune, Hyderabad, and Ahmedabad
4. Business, TDS, and Capital Gains
25 Frequently Asked Questions (FAQs) on the Income Tax Act, 2025
Part A: The Basics
1. What is the Income Tax Act, 2025?
It is India’s new overarching direct tax legislation, replacing the 1961 Act. It contains 536 sections and aims to simplify compliance and digitize the tax framework.
2. When did the new Act come into effect?
It came into force on April 1, 2026.
3. What is a "Tax Year"?
It replaces the old “Assessment Year” and “Previous Year” concepts. It is simply the financial year (April 1 to March 31) for which you are filing taxes.
4. Do the old section numbers still apply?
No. The sections have been remapped. For example, Section 80C is now Section 123, Section 80D is Section 126, and Section 87A is Section 156.
5. Are my old tax assessments invalidated?
No. Under the transition rules (Section 536), any proceedings, notices, or appeals relating to periods up to March 31, 2026, will continue under the old 1961 Act.
Part B: Slabs and Regimes
6. Did Budget 2026 change the tax slabs?
No, Budget 2026 retained the highly beneficial slab structure introduced previously, ranging from 0% (up to ₹4L) to 30% (above ₹24L).
7. Is the New Tax Regime still the default?
Yes, it is the default option and is now governed under Section 202.
8. What is the tax-free limit for salaried individuals?
Under the New Tax Regime, you pay zero tax on income up to ₹12.75 lakh (combining the ₹12 lakh Section 156 rebate limit and the ₹75,000 standard deduction).
9. Can I still opt for the Old Tax Regime?
Yes. You can still choose the Old Tax Regime if you have significant investments, home loan interest, and HRA to claim.
10. Is the Standard Deduction still available?
Yes, a standard deduction of ₹75,000 is available for salaried individuals under Section 19.
Part C: Allowances and Perquisites
11. Has the Children's Education Allowance changed?
Yes. It has massively increased from ₹100/month to ₹3,000/month per child.
12. What is the new Hostel Allowance limit?
It has increased from ₹300/month to ₹9,000/month per child.
13. Are meal vouchers still tax-free?
Yes, meal vouchers up to ₹200 per day are entirely tax-free under the new rules.
14. I live in Bengaluru. Do I get a 50% HRA exemption now?
Yes! The 50% HRA exemption bracket has been expanded beyond Delhi, Mumbai, Chennai, and Kolkata to include Bengaluru, Pune, Hyderabad, and Ahmedabad.
15. Is Form 16 still valid?
Part D: TDS, TCS, and Business Taxes
16. Where can I find TDS rules now?
17. What forms are used for quarterly TDS returns?
18. What is the TCS on overseas education and medical expenses?
Under the Liberalised Remittance Scheme (LRS), TCS on education and medical remittances exceeding ₹10 lakh is now a flat 2% (reduced from 5%).
19. Has TCS on overseas tour packages changed?
Yes, it has been simplified to a flat 2% rate, removing the old threshold-based multi-rate structure.
20. What happened to the Minimum Alternate Tax (MAT)?
The MAT rate has been reduced to 14%. Furthermore, it is now a final tax, meaning no new MAT credit will be accumulated from April 1, 2026.
Part E: Capital Gains, Investments & Compliance
21. How are share buybacks taxed now?
Buybacks are no longer exempt for investors. They are now taxed directly in the hands of the shareholders under Capital Gains.
22. Did the Securities Transaction Tax (STT) increase?
Yes, STT on Futures is now 0.05%, and STT on Options premiums is 0.15%.
23. Have the PAN quoting requirements for buying a car changed?
Yes, under the new rules, quoting a PAN for the purchase/sale of a motor vehicle is only required if the transaction value exceeds ₹5,00,000.
24. Can I file a TDS correction for FY 2020-21?
No. The portal enforces strict limitation periods. Corrections for periods ranging from FY 2018-19 to FY 2023-24 (Q3) were time-barred as of March 31, 2026.
