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One key proposal is the growth of cities eligible for the upper 50% Home Hire Allowance (HRA) exemption below the outdated regime.
New Revenue Tax Draft Guidelines (Picture Credit score: Instagram)
A detailed studying of the draft Revenue-tax Guidelines, 2026 means that the outdated tax regime will not be fading away anytime quickly. The Revenue Tax Division on Friday launched the draft guidelines that may operationalise the New Revenue Tax Act, 2025 from April 1, 2026. The simplification effort is critical: the variety of guidelines has been decreased from 511 to 333, and kinds have been minimize from 399 to 190.
With the brand new Act set to take impact within the subsequent monetary yr, the federal government has opened the draft guidelines for stakeholder session.
The principles define detailed procedures that taxpayers and professionals should comply with, with the said goal of easing compliance and lowering litigation. Nevertheless, whereas the broader intent is to streamline taxation, sure provisions might make the outdated tax regime extra engaging.
HRA reduction to cowl extra cities
One key proposal is the growth of cities eligible for the upper 50 % Home Hire Allowance (HRA) exemption below the outdated regime.
At current, solely 4 metros — Mumbai, Delhi, Kolkata and Chennai — qualify for the 50 % exemption, whereas different cities are capped at 40 %. The draft guidelines suggest including Bengaluru, Hyderabad, Pune and Ahmedabad to the upper exemption bracket.
Tax specialists say the transfer aligns HRA provisions with present housing realities in India’s main job hubs.
“This revision displays an effort to modernise HRA provisions consistent with altering city demographics and escalating residential prices in key financial centres,” stated Himank Singla, Founding Associate, SBHS & Co.
Allowances adjusted for inflation
The draft additionally revises a number of allowances that had remained unchanged for many years.
The youngsters schooling allowance is proposed to extend from Rs 100 to Rs 3,000 per thirty days per youngster (as much as two kids). The hostel expenditure allowance would rise from Rs 300 to Rs 9,000 per thirty days per youngster.
These sharp revisions restore the relevance of exemptions that had grow to be negligible on account of inflation. For taxpayers who depend on deductions and allowances, the adjustments might tilt the steadiness again in favour of the outdated regime.
As well as, the draft tightens compliance norms for international earnings reporting. Claims of international tax credit score by means of Type 44 would require certification by a chartered accountant in two circumstances — for firms, and the place international tax paid exceeds Rs 1 lakh. The CA would wish to confirm earnings data, proof of tax cost and treaty eligibility.
Why the outdated regime might stay related
Lately, the federal government has inspired migration to the brand new regime by decreasing tax charges and limiting deductions. Nevertheless, the most recent draft guidelines seem to rebalance the framework.
By updating exemptions and aligning allowances with inflation, the outdated regime regains sensible worth — significantly for salaried taxpayers paying excessive rents, funding kids’s schooling, or following structured tax planning methods.
February 09, 2026, 07:57 IST
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