Draft Income Tax Rules 2026:The government’sdraft Income Tax Rules 2026propose several changes that may benefit salaried employees who continue under old tax regime. While the new regime has received more attention in recent years, these draft tweaks aim to make the traditional structure more attractive by increasing exemption limits on common allowances.
Though the changes may appear technical, they could translate into real tax savings for working families.
One of the key proposals relates to House Rent Allowance (HRA).
Under the draft rules, cities such as Bengaluru, Hyderabad, Pune and Ahmedabad may be treated on par with major metro cities for HRA calculation. At present, only Delhi, Mumbai, Chennai and Kolkata qualify for a 50% basic salary exemption under HRA rules.
Also Read:Income Tax Relief For Salaried Class? Draft Rules 2026 May Allow Rs 1.05 Lakh Exemption on Meal Cards
If implemented, employees living in these newly added cities could claim up to 50% of their basic salary as HRA exemption, instead of the lower 40% limit applicable to non-metros.
For salaried workers paying high rents in fast-growing urban centres, this change could significantly reduce taxable income.
The draft rules also propose increasing the tax-free limit on gifts received from employers.
The exemption may rise from Rs 5,000 to Rs 15,000 in a financial year. This means festival gifts, vouchers and small incentives provided by companies could remain tax-free within the higher limit. This reduces the risk of such benefits being added to taxable income.
Parents may see major relief under the proposed revisions.
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