From April 1: What changes for salaried employees and senior citizens under new tax rules

The implementation of the Income-tax Act, 2025 and the Income-tax Rules, 2026 from April 1 marks a significant shift in how taxes are calculated, reported, and verified — especially for salaried individuals and senior citizens. While the framework aims to simplify compliance, it also introduces tighter disclosures and more structured reporting.

Key changes for salaried employees

For salaried taxpayers, the most visible change will be in salary structure, TDS calculations, and documentation.

The traditional Form 16 will be replaced by Form 130, a more detailed statement capturing salary income, tax deducted, and deductions claimed. In addition, a new Form 123 will record perquisites and fringe benefits — such as accommodation, company cars, concessional loans, travel, meals, and gifts — which will be digitally linked to Form 130.

This integration means greater transparency in salary components, but also more precise taxation of benefits that were earlier loosely reported.

Perquisite valuation rules have also been standardised. Notably, electric vehicles provided by employers will now be taxed similarly to small petrol or diesel cars, with fixed monthly valuation slabs depending on whether the employer or employee bears running costs.

Allowances have been revised to offer selective relief:

Meal vouchers are now allowed under the new tax regime (up to ₹200 per meal) Children’s education allowance increased to ₹3,000 per month per child Hostel allowance raised to ₹9,000 per month per child

Additionally, more cities such as Bengaluru, Hyderabad, Pune, and Ahmedabad now qualify for higher 50% HRA benefits, aligning them with metro cities.

However, these benefits come with stricter compliance. Employees claiming HRA and other deductions must now provide detailed disclosures through a separate form, including landlord details. PAN of the landlord is mandatory if annual rent exceeds ₹1 lakh, indicating tighter scrutiny and reduced scope for incorrect claims.

Another operational change affects job switches. Employees will now need to declare the tax regime opted with their previous employer, ensuring accurate TDS computation across employers within the same year.

What changes for senior citizens

For senior citizens, the reforms focus on simplification and consolidation of processes.

A key update is the introduction of Form 121, which merges the existing Forms 15G and 15H into a single unified declaration for interest income. The system will automatically identify whether the filer is a senior citizen and apply the relevant provisions, reducing procedural complexity.

Further, a single unified challan-cum-statement will replace multiple forms for TDS on transactions such as rent, property, professional payments, and even crypto assets. This unified system will use PAN instead of TAN, making compliance easier and more streamlined.

For senior citizens with interest income or pension-based earnings, this means simpler filing processes but increased data integration, as transactions will be more closely tracked.

Increased reporting and transparency

Both salaried individuals and senior citizens will see expanded reporting requirements. The threshold for reporting insurance premiums under the Statement of Financial Transactions (SFT) has been lowered, meaning more transactions will now reflect in the Annual Information Statement (AIS).

Additionally, disclosures for capital gains and foreign remittances have become more granular, requiring transaction-level details rather than aggregated figures.

The bottom line

From April 1, the tax system becomes more structured and technology-driven. For salaried employees, this means greater scrutiny of salary components and deductions, while for senior citizens, the focus is on simplified but more integrated reporting.

In both cases, the shift is clear: fewer forms, but deeper disclosures. Taxpayers will need to be more accurate and proactive, as the new system leaves less room for mismatches while increasing transparency across income and transactions.