The Central Board of Direct Taxes in India has announced significant revisions to income tax rules effective April 1, 2026, including modifications to HRA and allowances for children's education.
The Central Board of Direct Taxes (CBDT) has officially notified the Income Tax Rules, 2026, set to take effect on April 1, 2026. This update introduces a revised framework for various allowances and services related to salaried employees. One of the major changes includes alterations to the House Rent Allowance (HRA), which will now provide higher exemptions for specified metropolitan cities compared to other locations. In cities like Mumbai, Delhi, and Bengaluru, individuals can claim HRA exemptions of up to 50% of their salary, while it is capped at 40% for individuals residing in other areas. Notably, the new tax regime will exclude HRA exemptions altogether.
