India’s Central Board of Direct Taxes (CBDT) has rolled out significant changes to income tax regulations, effective April 1, 2026. These updates will primarily impact salaried employees by altering allowances like house rent, children’s education, and company benefits.
One major shift is the House Rent Allowance (HRA). Employees residing in metro areas such as Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Pune, Ahmedabad, and Bengaluru can now claim up to 50% of their salary as HRA exemption under the old tax regime. For other cities, this limit stands at 40%. However, under the new tax regime introduced by these rules, no HRA benefit will be applicable.
The new regulations also boost the children’s education allowance significantly. Previously capped at ₹100 per month for each child, families can now deduct up to ₹3,000 per month for two children—an increase that allows them to claim a total of ₹9,000 tax-free annually for educational expenses.
Adjustments extend to company-provided vehicles too. For cars with engines up to 1.6 litres, companies can consider ₹5,000 monthly plus an additional ₹3,000 for driver costs. In contrast, vehicles with larger engines will see claims rise to ₹7,000 plus a driver allowance of ₹3,000. If employees use their own vehicles while receiving reimbursements from employers for expenses incurred during work-related travel or errands—they may still face taxes after certain deductions.
As far as gifts go: if total gifts or vouchers exceed ₹15,000 annually—they’ll be subject to taxation. Conversely, free meals or food coupons valued at up to ₹200 each remain exempt from taxes even under the revised guidelines. Yet services provided by gardeners or cleaners paid through companies will now count as taxable income.
Taxpayers aiming for deductions under the old scheme must hold onto proper documentation; those paying over ₹1 lakh in rent annually must present landlords’ names and PAN numbers along with proof of travel and loan details accompanied by PAN information.