Your salary and tax world will change from April 1, bumper increase in Form-16 leave and allowances
New Delhi. With the beginning of the new financial year (FY 2026-27), many big changes will be implemented for the common man and especially the working class. These decisions of the Central Government and the Income Tax Department will have a direct impact on your take-home salary, tax filing and investments.
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Form-16 round ends
‘Form-16’, which has been the basis of tax filing for the last several decades, will now remain history. The government has now decided to rely entirely on Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) to make the tax process paperless and automatic. Now taxpayers will not have to wait for the certificate of their company as the return will be pre-filled based on the data available on the portal.
Historic increase in children’s education and hostel allowances
In view of inflation, the government has changed the two decade old allowance limit, ‘Children Education Allowance’ has been increased from ₹ 100 per month to ₹ 1,000 per month (up to two children). Hostel allowance, which was earlier only ₹300, has been increased to ₹3,000 per month. This will provide huge tax relief to private sector employees.
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‘New Tax Regime’ now default and more attractive: If you have not chosen any investment option, tax on your salary will automatically be deducted under the ‘New Tax Regime’. The standard deduction limit in this regime has also been increased to ₹75,000 from April 1, which will leave more money in the hands of the middle class to spend.
Extension in the limit of Leave Encashment
The limit of tax exemption on ‘Leave Encashment’ received at the time of retirement or leaving the job has now been increased. Even for non-government employees, leave money up to ₹30 lakh will be completely tax-free, which is much higher than before. Along with this, changes have also been made in the rules of UPI and credit card payment to increase security in banking and digital transactions, due to which now ‘two-factor authentication’ as well as biometric or face-ID will be mandatory for online transfers of more than ₹ 50,000.
Report: Sushil Kumar Sah
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