Blitz Bureau
NEW DELHI: As India approaches the new fiscal year FY27, the country’s direct tax system is set for a major overhaul from April 1, 2026, with the new Income Tax Act, 2025, coming into force — replacing the six-decade-old 1961 legislation and introducing changes in compliance, terminology and taxation. Major reform under the new framework is the replacement of the ‘Financial Year’ (FY) and ‘Assessment Year’ (AY) with a single ‘tax year’, which could simplify the filing process and improve clarity for taxpayers.
Moreover, the timelines for filing income tax returns have also been revised, while July 31 deadline remains unchanged for salaried individuals, non-audit cases such as self-employed taxpayers and professionals will now have time until August 31 to file their returns.
The cost of trading in derivatives will rise as the Securities Transaction Tax (STT) has been increased across futures and options — which was announced by Finance Minister Nirmala Sitharaman.
At the same time, rules for claiming House Rent Allowance (HRA) have been tightened, requiring disclosure of landlord details, including PAN, in specified cases. The scope of cities eligible for the higher HRA exemption has also been widened, with Bengaluru, Hyderabad, Pune and Ahmedabad now joining the existing list of metros. In addition, employee-related tax benefits have been enhanced, with the exemption on meal benefits raised and the annual limit on tax-free gifts increased.
Meanwhile, allowances for children, including education and hostel expenses, have also increased under the old tax regime. In a major shift, stock buybacks will now be taxed as capital gains instead of deemed dividends, impacting both promoters and retail investors.
