Income Tax Update 2026: If you are a salaried employee then you must be waiting for Form 16 every year in June-July. But now your tax dictionary is about to change. After the implementation of the government’s proposed Income Tax Act 2025, the names and numbers of old tax forms will change from April 1, 2026. This new law will replace the old Income Tax Act 1961.
Will Form 16 really be discontinued?
There is no need to panic. Form 16 will not be closed, just its name and number will be changed. Now it will be known as Form 130.
The work will remain the same i.e. issuing TDS certificate, but under the new law it will get a new tag. Meaning “The name has changed, but the work has not.”
Names of many more tax forms will be changed
There is a preparation to change not only Form 16, but also the names and numbers of many other forms related to income tax.
The aim of the government is to make form numbering more systematic and easy, so that there is less confusion in tax filing. In vernacular, it says, “No twists and turns, a straight and clean system.”
Relief in HRA and education allowance
According to the draft rules 2026, there can be a big relief in HRA. It is proposed to include cities like Pune, Bengaluru, Ahmedabad and Hyderabad in the category of 50% HRA exemption.
There is also a preparation to increase the limit of children’s education allowance from ₹ 100 to ₹ 3,000 per month. Middle class families can get direct benefit from this.
There will be less rules, the system will be easier
The purpose of the new law is to reduce complexity. Currently there are around 511 rules, there is a plan to reduce them to 333.
The government can also give a transition period, so that the old and new form numbers work together for some time and taxpayers do not face any problem.
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What should taxpayers do now?
There is no need to panic at the moment. The old forms will remain valid till 31 March 2026. These changes will be applicable from assessment year 2026-27.
Just remember that next year when you ask for TDS certificate from your employer, you may have to say Form 130 instead of Form 16.
Overall, the government claims that the new tax law will make the system easier and understandable. Now it remains to be seen how much benefit the common man gets on the ground.
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