By Sandeep Jhunjhunwala
The coming financial year is expected to mark a significant shift in India’s income tax framework with the introduction of Income-tax Act 2025 and the proposed Income-tax Rules 2026, scheduled to take effect from April 1, 2026. For individual taxpayers, particularly salaried employees, the new framework is likely to influence how deductions and exemptions are claimed, the documentation that needs to be maintained, and the overall compliance process associated with filing income tax returns.
Perquisites by employers
The draft rules update the valuation framework for certain perquisites provided by employers, including employer-provided cars, interest-free or concessional loans, and other facilities. For salaried taxpayers, these revisions may restore relevance to allowances that had lost significance under the earlier framework. However, exemptions in respect of such allowances would be available only where these form part of an employee’s cost-to-company structure. Those who wish to avail themselves of the benefit of the enhanced exemption limits may need to review their salary structures and, where necessary, engage with employers to restructure compensation packages so that eligible allowances are appropriately incorporated.
Another significant development under the proposed framework relates to reporting requirements in income tax returns (ITR). The draft rules indicate a shift towards a more structured and technology-driven reporting system. ITR forms are expected to capture more granular financial information through standardised data fields while reducing ambiguity in disclosures.
Technology-driven verification
The proposed framework also indicates a move towards technology-driven verification processes while filing ITRs. A notable procedural change is that the option to exercise or withdraw the new tax regime will now be made directly in the return of income for the relevant tax year.
This removes the requirement to file a separate form such as Form 10-IEA. Also, the deadline for filing revised returns has been extended from December 31 to March 31 of the subsequent tax period. This change gives taxpayers greater flexibility to correct errors or omissions in their filings. At the same time, the revised framework may introduce more specific disclosure requirements for taxpayers claiming deductions.
Overall, the proposed income tax framework reflects a broader policy shift towards simplification, digitisation and improved transparency in tax administration. While the revised provisions are expected to make the tax system more contemporary, the transition to the new regime may initially require taxpayers and employers to familiarise themselves with the updated rules, reporting formats and documentation requirements as the framework evolves.
The writer is partner, Nangia Global. Inputs from Sanjay Kumar and Ganesh Gunamalla
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.