Gross Income (Rs) Deduction Limit Required (Rs) 12,00,000 0 15,00,000 5,43,750 18,00,000 6,41,670 20,00,000 7,08,330 25,00,000 8,00,000
As the new financial year (FY 26-27) begins, salaried employees should note that some changes in Tax Deducted at Source (TDS) rules have come into effect on April 1, 2026. The Income-tax Act, 2025 has introduced revised section numbers, updated forms and new compliance requirements from April 1.Chartered accountant Abhishek Soni, CEO & co-founder, Tax2win, says, “The new TDS rules for salaried employees are mainly about how your tax is calculated and adjusted during a year. For FY 2025–26, TDS on salary will be calculated under the new tax regime by default. If you want to continue with the old tax regime, you must inform your employer.”From April 1, 2026, your employer will reset and recalculate your TDS for the new financial year based on your expected income, deductions and the chosen tax regime, Soni added.Soni highlights some important updates:* You now get a higher standard deduction of Rs 75,000, which reduces your taxable income* If your income is within limits (up to Rs 12 lakh), you may not have to pay any tax, so no TDS will be deducted* Employers can also adjust TDS already deducted on other income (like interest), which can reduce your TDS on salary.Also read: New income tax rules from April 1, 2026: From HRA relief to new ITR deadlines, key changes explained CA Mihir Tanna from SK Patodia & Associates explains, “From April 1, 2026, the government has increased some key tax-free benefits for employees. For example, the Children Education Allowance has gone up from Rs 100 to Rs 3,000 per month for each child, and the hostel allowance has increased from Rs 300 to Rs 9,000 per month per child. This means employees can keep more of their salary without paying tax on these amounts, especially if they are using the old tax system and salary structure includes said allowances.”Adding further, Tanna says, “In simple terms, if a taxpayer’s total deductions and exemptions are higher than the amount shown for their income bracket, choosing the old tax regime may result in lower tax compared to the new regime.”Also read: PAN rules change from April 1: Higher PAN quoting limits; new Form 93; additional documents required for application and more What should salaried employees consider when choosing between the old and new tax regimes?Tanna says that the old tax regime can increase the workload/procedural burden for both employers and employees. Employers have to check supporting documents related to allowances.Finally, choosing between the old and new tax regime mainly depends on salary structure and how many deductions you can claim. If you are a salaried person with very few deductions, the new tax regime may suit you better because it has simpler tax rates and offers a higher rebate for income up to Rs 12 lakh, added Tanna.