Here’s how your in-hand salary changes after 1 April as new Income-Tax Act comes into effect — Check details

The new Income Tax (I-T) Act comes into effect tomorrow, April 1, 2026, coinciding with the start of the financial year 2026-27, and is expected to impact salaried employees, particularly those under the Old Tax regime.

Changes to Income Tax Rules Effective April 1, 2026

The new rules provide higher exemptions for an additional four cities and increase allowances for children’s education and hostel expenditure, meal cards, gift coupons, and conveyance, among others.

There are no changes to income tax slabs from April 1. This is because no changes were announced during Budget 2026, nor were any mentioned in subsequent notifications of the Income Tax Act, 2025, and Income Tax Rules, 2026.

Taxation of Loans and Corporate Perks

• Corporate loans with no interest or interest rates below the market rate will be taxed based on the difference between the State Bank of India’s lending rate and the actual rate charged, with certain exceptions.
• Corporate loans less than ₹2 lakh and those taken for medical emergencies remain tax-free, an increase from the previous limit of ₹20,000.

Taxes are also increasing for the use of corporate vehicles for both work and personal activities. A tax of ₹8,000 per month will apply to cars with engines up to 1.6 liters, and ₹10,000 per month for larger vehicles, under both the Old and New Tax regimes.

According to CA Nitin Kaushik, if an employer provides a 1.8L engine SUV for mixed use, the taxable perquisite value is increasing from roughly ₹2,400 to ₹7,000 per month. Adding a chauffeur increases this to another ₹3,000 monthly, a rise from ₹900. This could add over ₹1.2 Lakh to a senior executive’s taxable income annually.

Securities Transaction Tax and Share Buybacks

The Centre has increased the Securities Transaction Tax (STT) for the equity derivatives segment, impacting futures and options (F&O) traders. This tax is levied on every purchase and sale of securities on recognized stock exchanges.

STT on futures will be increased to 0.05% from 0.02%, and on options transactions will be raised to 0.15% from 0.1%, starting April 1.

Any amount received from the buyback of shares will be taxed as capital gains from April 1. Promoter shareholders will have to pay a “differential buyback tax” with an effective rate of 22% for corporate promoters and 30% for non-corporate promoters.

Changes to Tax Collected at Source

The Budget rationalized Tax Collected at Source (TCS) to ease compliance, reduce refund delays, and address taxpayer confusion, effective April 1.

• TCS rates on remittance under the Liberalised Remittance Scheme (LRS) for overseas tour packages have been reduced to a single flat rate of 2% without a threshold, from the existing dual rate of 5% and 20%.
• TCS rate for remittance under LRS for education and medical treatment has been reduced from 5% to 2%.

Potential Impact of New Labour Laws

Take-home salary may also be reduced if the new labour laws come into effect in the new financial year. Under the ‘wages’ section of the four new labour codes, companies will now have to pay at least 50% of an employee’s salary as the basic wage component, potentially increasing provident fund contributions and reducing in-hand salary.

If companies increase basic pay, they will likely cut allowances such as “special allowance,” “supplementary allowance,” or “flexi-benefit” to maintain the same overall pay.

Disclaimer: This article is for informational purposes only and should not be construed as tax advice. Readers are advised to consult a qualified tax professional or refer to official Income Tax Department resources before filing their returns.