Will the new Income Tax Act be better for salaried taxpayers? Experts weigh in

The new Income Tax (I-T) Act will come into force from 1 April 2026, and the Central Board of Direct Taxes (CBDT) has already released the draft Income Tax Rules along with the proposed forms.

Experts suggest that the new rules – set to come into force on 1 April – will be beneficial to salaried employees who opt for the old tax regime because they will be able to claim higher exemptions. For example, under the new income tax rules, an additional four new cities have been added to the list of cities eligible for 50% salary criterion for computing HRA exemption. Besides, higher children's education and hostel allowance are allowed under the new tax rules.

Exemptions revised

These are some of the revised exemptions:

1. The exemption for the children's education allowance has increased from ₹100 to ₹3,000 per month per child.

2. Hostel Expenditure Allowance has been raised from ₹300 to ₹9,000 per month per child.

3. Four cities - Ahmedabad, Bengaluru, Hyderabad and Pune - have been included in the list of cities eligible for 50% salary criterion for the purpose of computing HRA exemption.

4. The exemption limit for free food and non-alcoholic beverages provided by an employer to an employee has been increased from ₹50 per meal to ₹200 per meal

5. The exemption for the allowance granted to employees working in any transport system has been enhanced from ₹10,000 per month or 70% of the allowance, whichever is lower, to ₹25,000 per month or 70% of the allowance, whichever is lower.

What experts say

Tax experts and chartered accountants give a thumbs- up to the new income tax rules and look forward to the next financial year when they will come into force.

CA Ashok Mehta, Chairman of the Research and Publications Committee, Chamber of Tax Consultants, said, “The New Income Tax Act 2025 marks a move toward a collaborative tax ecosystem, which will benefit salaried employees. The New Act marks a shift towards simpler language, clarity about what is expected of the taxpayer and the removal of outdated provisions. The New Act moves towards the approach of giving an opportunity to taxpayers to rectify their mistakes instead of initiating penalty and prosecution.”

"The increase of the threshold limit of zero tax to ₹12.75 lakh and removal of prosecutions for small taxpayers by allowing amnesty with a small penalty is a taxpayer-friendly measure. The simplification and the clarity of provision will help the salaried employees," adds Mehta.

"The New Income Tax Act is better for the salaried taxpayers in terms of allowance and exemption. For example, the hostel and the children's education allowance has been increased significantly. Bengaluru, Hyderabad, Pune and Ahmedabad are added for 50% HRA. These are some of the important considerations," says Pratibha Goyal, partner, PD Gupta & Company, a Delhi-based CA firm.

“The new Income Tax (I-T) Act will lead to tax savings for the salaried people, especially when they opt for the old tax regime. From HRA to higher hostel allowance for children, there is an array of exemptions for them. There are many allowances and exemptions,” says Chirag Chauhan, founder of CA Chauhan and Company.

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