New Income Tax Act 2025 and Rules 2026 for India (Effective 1 April 2026)
Hello everyone,
The Income Tax Act 2025 came into effect from 1 April 2026. This new law replaces the old Income Tax Act of 1961. Along with the new Act, the Income Tax Rules 2026 have also been released by the government.
These updates bring practical changes to salary processing, HRA exemptions, perquisite calculations, forms, and declarations. The new framework focuses on clearer language and updated rules for better compliance.
Note: The basic tax slabs and rates remain the same.
We have already implemented all these changes in Zoho Payroll. Zoho Payroll will automatically apply the new rules, calculations, forms, and section references starting from FY 2026-27 (Tax Year 2026-27). You do not need to do any manual configuration or updates.
We still recommend reviewing the key updates below. This will help you understand the changes and communicate them clearly to your employees or management when needed.
Note: While there are several updates overall, we are highlighting the following five changes in this post because they are the most practical and immediately relevant for payroll teams.
Higher HRA Exemption for More Cities
House Rent Allowance (HRA) helps employees with their rent expenses. Employees can claim a tax exemption on this amount.
Old Rule: Only four cities (Delhi, Mumbai, Kolkata, and Chennai) were treated as metro cities.
Employees in these cities could claim exemption up to 50 percent of their basic salary (plus dearness allowance, if any). In other cities, the limit was 40 percent.
New Rule (effective 1 April 2026): Bengaluru, Hyderabad, Pune, and Ahmedabad cities have been added to the metro list.
Note: This is only applicable for employees in the Old tax regime.
Employees living in these eight cities can now claim the higher exemption limit of 50 percent of basic salary (plus dearness allowance, if applicable). This will benefit many employees in these cities where rents are high.
The actual exemption allowed is still the lowest of these three amounts:
- Actual HRA received from the employer
- Rent actually paid minus 10 percent of basic salary
- 50 percent or 40 percent of basic salary (depending on the city)
Company-Provided Car (Higher Taxable Value)
When a company provides a car to an employee for both official and personal use, a fixed monthly value is added to the employee’s taxable salary as a perquisite regardless of whether the company or the employee bears the running and maintenance expenses. This value depends on the car’s engine capacity and who bears the running & maintenance expenses (fuel, repairs, etc.). Only the amount of this taxable value changes depending on who pays for the expenses.
Here is the new valuation under the Income Tax Rules, 2026:
Engine Capacity | Employer Bears Running & Maintenance Expenses | Employee Bears Running & Maintenance Expenses | Additional if Driver is Provided by Company |
Up to 1.6 litres (including Electric Vehicles) | ₹5,000 per month | ₹2,000 per month | + ₹3,000 per month |
Above 1.6 litres | ₹7,000 per month | ₹3,000 per month | + ₹3,000 per month |
Interest-Free Loans from Employer
Companies often provide small interest-free loans to employees for personal needs.
New Rule: No perquisite tax applies if the total interest-free loan amount does not exceed Rs 2 lakh in a year.
This limit is significantly higher than the earlier limit of Rs 20,000. Any loan amount above Rs 2 lakh may attract a small notional interest as a taxable benefit.
New Section Numbers in the Income Tax Act
The new Income Tax Act 2025 has restructured and renumbered most sections of the Income Tax Act. It now has only 536 sections, organized logically. Related rules have been grouped together.
A few examples:
- Old Section 192 (the rule for TDS deduction on salary) is now Section 392.
- Many scattered sections related to other types of TDS (Tax Deducted at Source on payments like rent, commission, etc.) have been brought together and consolidated into Section 393.
- Provisions related to TCS (Tax Collected at Source) are now mostly under Section 394.
Zoho Payroll automatically handles the new section references and mappings.
Form Name Changes
To make tax procedures simpler and more organized, the government has introduced new form numbers under the new Act and Rules.
What has changed:
Form 16 (the familiar annual salary TDS certificate that employers issue to employees at the end of the year or when they leave the job) is now called Form 130.
The employee declaration form used for claiming HRA, LTA, home loan interest, and other exemptions (previously Form 12BB) is now Form 124.
Zoho Payroll will automatically use the new form numbers (Form 130 and Form 124) wherever required from Financial Year (FY) 2026-27 onwards.
Important Transition Note:
- Form 16 for FY 2025-26 (salary paid from April 2025 to March 2026) will still be issued under the old name and the old Income Tax Act, 1961.
- The switch to Form 130 will apply only to the salary TDS certificate for FY 2026-27 (which will be issued in 2027).
For a complete picture of all changes under the new Act (including detailed comparisons, tables, and other updates like higher limits for children’s education allowance, hostel allowance, festival gifts, meal perquisites), you can read this comprehensive guide.
If you have any questions about how these changes appear in Zoho Payroll, or if you need help with a specific scenario, feel free to reply in this thread or contact support@zohopayroll.com. We are happy to assist.
Thank you for using Zoho Payroll. We are committed to keeping your payroll fully compliant and hassle-free with the latest tax rules.
With a shared purpose,
The Zoho Payroll Team
Access your files securely from anywhere
Zoho FSM Video Tutorials
Centralize Knowledge. Transform Learning.
All-in-one knowledge management and training platform for your employees and customers.
New to Zoho Recruit?
Zoho Developer Community
New to Zoho LandingPage?
Zoho LandingPage Resources
New to Zoho Survey?
New to Zoho CRM Plus?
Deliver unforgettable customer experiences
New to Zoho CRM Plus?
Deliver unforgettable customer experiences
New to Zoho Marketing Plus?
Everything you need to run your marketing
New to Zoho Marketing Plus?
Everything you need to run your marketing
New to Bigin?
Topic Participants
Bennet Noel L
payroll
Sundeep
New to Zoho TeamInbox?
Zoho TeamInbox Resources
Zoho CRM Plus Resources
Zoho Books Resources
Zoho Billing Resources
Zoho Projects Resources
Zoho Sprints Resources
Qntrl Resources
Zoho Creator Resources
Zoho CRM Resources
Design. Discuss. Deliver.
Zoho Show Resources
Get Started. Write Away!
Writer is a powerful online word processor, designed for collaborative work.
Zoho CRM コンテンツ
-
オンラインヘルプ
-
Webセミナー
-
機能活用動画
-
よくある質問
-
Ebook
-
-
Zoho Campaigns
- Zoho サービスのWebセミナー
その他のサービス コンテンツ
Nederlandse Hulpbronnen
ご検討中の方
Recent Topics
Cannot add note to record on mobile
In the latest version of the mobile app - if a record already has notes associated with it - you can add a note via the mobile app - if a record does not have previous notes there is no way to add a new one - it allows me only to send emailThe Social Wall: August 2026
Hello everyone. Welcome to the August 2026 edition of The Social Wall. This month, we're bringing you updates that make it easier to reach your audience, manage more channels, and streamline your publishing workflow. Here’s what’s new. WhatsApp bulk messagingCheck out in Meetings
Why there is no check out in Meetings of Zoho CRM, very difficult to trackAdmin Logging in as another User
How can a Super Admin login as another user. For example, I have a sales rep that is having issues with their Accounts and I want to view their Zoho Account with out having to do a GTM and sharing screens. Latest Update (27th April 2026): With the earlyHow do I get to "Admin Panel"
I just started a Cliq account. I am the sole administrator. As I read the documentation, I keep seeing reference to an "Admin Panel". I see no way to access this from my Cliq account. How do I access this panel?【初開催！ オンライン】Zoho Campaigns メール配信の基礎・活用勉強会を開催します！ 10/15 参加無料
ユーザーの皆さま、こんにちは。 Zoho コミュニティグループの中野です。 Zoho ユーザーコミュニティ初となる、メールマーケティングをテーマにしたオンライン勉強会を開催します！ ▶︎イベント詳細・参加登録はこちら 今回取り上げるサービスは「Zoho Campaigns」です。 「Zoho CRMとZoho Campaignsのどちらからメールを配信すればよいか分からない」 「一斉配信はできるようになったけれど、現在のリスト管理や設定が正しいか不安」 「メールを送るだけで終わり、配信後の改善につなげられていない」Lookups and Custom Modules
I created a Custom Module that I'm calling "Item Purchasing Group". This module will store information for groups of Items that must be purchased together (including minimum overall quantities and/or values, etc.). This will have a one-to-many relationshipMarketing Tip #46: Run flash sales the right way
A flash sale can do a lot for your store. It can clear slow-moving inventory, spike revenue on a slow day, or reward your most loyal customers. But if done carelessly, flash sales can backfire. Customers start expecting discounts, stop buying at fullIntroducing Smart Fields in Zoho Forms
Hello form builders! We are excited to introduce Smart Fields in Zoho Forms - a faster way to add calculations to your forms without writing formulas. Instead of creating multiple fields and configuring complex calculations yourself, you can now dragCheckbox not displaying correctly in subform
Greetings: I have shared my app (wv) with support. I am having problems with a checkbox field not displaying correctly in a subform. The main form is called volunteers and the subform is called volunteers_subform. The field in question is called roles. When you access the subform by itself the checkbox lookup displays as checkboxes. But when you view it in the main volunteers form, it displays as a multi-select dropdown instead. I have attached jpegs showing the difference. Any thoughts?Unbundle feature for composite items
We receive composite items from our vendors and sell them either individually or create other composite items out of them. So, there is a lot of bundling and unbundling involved with our composite items. Previously, this feature was supported in formThe reason I switched away from Zoho Notebook
My main reason for switching to Zoho was driven by three core principles: moving away from US-based products, keeping my data within India as much as possible, and supporting Indian companies. With that intent, I’ve been actively de-Googling my digitalValid characters for use in email addresses using Zoho's apps/APIs
We have found an issue with the + sign character in zoho subs - we are allowed to create a customer with an email address that has a plus sign but the API doesn't allow the + so the billing portal is not created. We are going to prevent users from usingExpand Zoho Analytics Spatial Capabitlities
Dear Analytics team Thanks for the great product - I'm a big fan on Analytics and the monthly release highlights is one of my favourite emails to receive. I'd like to request expansion and improvement of Zoho Analytics spatial data capabilities, namely:Automate customer follow-ups with Sequences in Bigin
Greetings, We hope you're all doing well! We're happy to announce a new feature that we've added to Bigin. Following up with every lead at the right time can be challenging, especially when your team is managing multiple conversations across emails, calls,Dashboards for Customers
Is it possible to build dashboards for each customers in the community for their tickets?Displaying only unread tickets in ticket view
Hello, I was wondering if someone might be able to help me with this one. We use filters to display our ticket list, typically using a saved filter which displays the tickets which are overdue or due today. What I'd really like is another filter thatAdding Custom Status Options in Work Order Action Menu
Hello FSM Team, We would like to inquire if it is possible to add more custom options in the Work Order action/status dropdown (e.g., Cancel, Terminate, Non-Billable, Void, etc.). Currently, the available options are limited, and we are unable to customizeCan we have an automated TDS Receivable Recon with Form 26AS of Income Tax Portal ?
Can we have an automated TDS Receivable Recon with Form 26AS of Income Tax Portal ?Tag Limi?
is there any way to create more than 20 tags?prefill_data for Creator + Merge & Sign
Hello, Is there an option to use prefill_data for signer fields from creator? I see the option for CRM but it will not work with creator? I have tried passing the value in the signer data, and that also does not work. Alternatively, is there a way toDelug script
I have been looking at auto-update a amount (home currency) field from another module. Zoho native multicurrency was used in the other module (we have 4 here). Custom script was input with no error, but the field was not updated on trigger. Script asCan I Build a Gaming Website Using Zoho? Need a Quick Roadmap
Hi Dear Members, I want to create a gaming website using Zoho. Is it possible? My goal is to build a sleek, unique, easy-to-navigate, and fast-loading website for a gaming project. I want the site to look professional, user-friendly, and optimized forRemove Due Date from Statements
Is it possible to remove the Due Date on the Invoice transation line on statements? I have figured work arounds to get the Invoice detail on the Statement but cannot work out haw to simplify the stament by removing the "- due on xx/xx/2026" - it reallyWhat Should an Agent-Native Project Workspace Look Like
AI is moving beyond assistants that simply answer questions. With tools like MCP, agents can now interact directly with project data and perform actions. That makes me wonder: what should an agent-native project workspace actually look like? For me, itunable to join meeting due to speaker issue
unable to join meeting due to speaker issueHow to add formatting in zoho.cliq.postToUser(...) message?
In a CRM Deluge function, I'm trying to use the message formatting guidelines given here: https://www.zoho.com/deluge/help/cliq/posting-to-zoho-cliq.html#message-formats My message is: message: #Title text. The result in Cliq is: #Title text. (no largeMarketing Tip #50: Sell digital products and use them to grow your store
Physical products need packaging, shipping, and stock management. Digital products need none of that. Once created, they can be sold an unlimited number of times, delivered instantly, and never go out of stock. What counts as a digital product? A digitalTurn off Mobile Optimize
Hello is it possible to stop the automatic mobile optimization of my site as it looks much better on a mobile in full site format rather than mobile format. ThanksHow to select from pricebook when creating a salesorder or quote
I am creating a sales order and when selecting the Products I do not see any where to select from pricebooks. How do i associate this to my orders?API - Available Stock Definitions
Okay, Zoho team... your copywriters fell down on the job for this one :) I think these warrant a bit more explanation as to what they include and what they don't.Cross-application Deluge calls fail when application link name starts with a number
I encountered an issue when calling a custom function in another Zoho Creator application within the same account. The target application’s URL/application link name began with a number, similar to: 27_example_application The following cross-applicationTransformez vos webinaires en opérations automatisées
Organiser un webinaire, c’est bien plus que passer en direct. Il faut gérer les inscriptions, suivre les participants, envoyer les enregistrements, mettre à jour le CRM… et s’assurer que chaque étape se déroule au bon moment. L’automatisation des workflowsMarketing Tip #1: Optimize item titles for SEO
Your item title is the first thing both Google and shoppers notice. Instead of a generic “Leather Bag,” go for something detailed like “Handcrafted Leather Laptop Bag – Durable & Stylish.” This helps your items rank better in search results and instantlyHow can I filter inactive/disable agent tickets?
Hello, We have an user-agent that left the company and we inactive/disabled his agent. So, now I can no longer filter or search tickets that he is the current owner, or even create a rule to reassign tickets to another person when the ticket is reopen.How do i move multiple tickets to a different department?
Hello, i have several tickets that have been assigned to the wrong department. I am talking about hundreds of automatically generated ones that come from a separate system. How can i select them all at once to move them to another department in one go? I can select them in "unsassigned open tickets view" but i can't find a "move to another department" option. I also can't seem to assign multiple tickets to the same agent in that same view. Could somebody advice?Add Reauthentication Option for Zoho Bug Tracker Integration in Zoho Desk
Hello Zoho Desk Team, We hope you're doing well. We would like to request an enhancement to the Zoho Bug Tracker integration within Zoho Desk. Current Limitation: At the moment, there is no option to reauthenticate the Zoho Bug Tracker integration inCreate Package From A Picklist
Dear Zoho, Can it be made possible to create a package from a picklist? The reason our company makes a picklist is for that to become a package Our sales orders have 600-1000 items I hope that makes it clear that it's hard to delete 990 items when weMigrating from Zoho Checkout to Zoho Billing
I have an active Zoho Checkout account where I'm charging customers for subscriptions. Now I'm looking to upgrade and only use Zoho BIlling, in which my account in on read only mode at the moment. I can see is also tracking the customers and its payments.Step up your lead generation game with online forms
Hello fellow form builders, Generating leads for your sales team gets easier when you integrate your CRM with online forms. To help show you how to use forms as part of your lead generation strategy, we have exclusive tips and tricks on how to collect, update and prioritize lead information in Zoho CRM based on form responses. 1. Create new leads If CRM software is designed to help you handle your business easily, that means getting data into it should also be easy. Check out the article on howNext Page