Key Takeaways
- 8 major financial changes took effect on April 1, 2026, affecting every business in India.
- The new Income Tax Act 2025 is the biggest structural shift in 65 years.
- ITR-3 and ITR-4 deadlines permanently moved to August 31.
- HRA exemption rules expanded to 8 cities. SGB taxation changed. Digital payment 2FA mandated.
April 1, 2026 brought more regulatory changes in a single day than most years bring in total. For SME owners and founders, keeping track of every change while running your business is nearly impossible.
This guide distills the 8 major changes into what you actually need to do. No legal jargon, just action items.
Looking for expert help with April 2026 financial changes and compliance checklist for SME owners? The team at TaxGarden helps Indian SMEs stay compliant end-to-end — filings, notices, and advisory, all in one place.
Change 1: New Income Tax Act 2025
The Income Tax Act 1961 has been replaced after 65 years. The new Act has fewer sections (536 vs 819), simplified language, and new section numbers for every provision.
What you need to do:
- Confirm your CA is using new section numbers
- Update accounting software for TDS entries
- Verify your regime choice (new regime is now default)
Change 2: ITR Due Date Extensions
The filing deadlines have been permanently revised:
| ITR Form | Old Deadline | New Permanent Deadline |
|---|---|---|
| ITR-1, ITR-2 | July 31 | July 31 (unchanged) |
| ITR-3 (business income, audit required) | July 31 (with ad hoc extensions) | August 31 (permanent) |
| ITR-4 (presumptive, audit cases) | July 31 | August 31 (permanent) |
What you need to do:
- Update your compliance calendar with the August 31 deadline
- Do not treat the extra month as an excuse to delay preparation. Start early.
- Remember: tax audit reports should be completed well before the filing deadline
Change 3: HRA Exemption for 8 Cities
The list of metro cities eligible for enhanced HRA exemption (50% of basic salary instead of 40%) has been expanded from 4 to 8 cities:
Old list (4 cities): Delhi, Mumbai, Kolkata, Chennai
New list (8 cities): Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Pune, Hyderabad, Ahmedabad
What you need to do:
- If your business is in one of the 4 new cities and you pay HRA to employees, recalculate HRA exemption at 50% instead of 40%
- Update payroll software to reflect the new metro list
- If you claim HRA as a proprietor, recalculate your own exemption
Change 4: SGB Taxation Changes
Sovereign Gold Bonds (SGBs) have new tax treatment:
- Capital gains on SGB redemption at maturity continue to be exempt
- SGB sold on the exchange before maturity: gains are now taxable as capital gains
- Interest on SGBs (2.5% per annum) remains taxable at slab rate
What you need to do:
- If you hold SGBs, plan your exit strategy considering the new taxation
- If selling before maturity, factor in capital gains tax in your return
- Report SGB interest income in ITR
Change 5: STT Rate Increase
Securities Transaction Tax (STT) on equity delivery has been increased. The new rate affects every stock market investor.
What you need to do:
- No action needed on your part. STT is automatically deducted by your broker.
- The increased STT will be reflected in your contract notes
- Remember that STT paid is not deductible as a business expense (unless you are in the business of trading)
Change 6: TCS Reduction on Foreign Education
Tax Collected at Source (TCS) on foreign remittances under the Liberalized Remittance Scheme (LRS) has been rationalized:
- Remittances for education funded by education loans: 0.5% TCS (reduced from higher rates)
- Other education remittances above Rs 7 lakh: 5% TCS
- Non-education LRS remittances above Rs 7 lakh: 20% TCS (unchanged)
What you need to do:
- If you are sending money abroad for education (personal or for employees/family), check the applicable TCS rate
- TCS paid can be claimed as credit in your ITR
Change 7: Digital Payment 2FA Mandate
All digital payments above a specified threshold now require two-factor authentication (2FA). This affects UPI, net banking, debit card, and credit card transactions.
What you need to do:
- Ensure your business bank accounts have 2FA enabled
- If you accept digital payments from customers, verify your payment gateway supports 2FA
- Train staff on the new authentication requirements for high-value transactions
- This may slightly increase payment processing time for large B2B transactions
Change 8: FASTag Fee Revision
FASTag charges at toll plazas have been revised. For businesses with logistics and transport operations, this directly affects transportation costs.
What you need to do:
- Update your logistics cost estimates for FY 2026-27
- Ensure all company vehicles have valid, recharged FASTags
- Factor revised toll costs into pricing and quotation calculations
Looking for expert help with business compliance checklist and tax advisory for FY 2026-27? The team at TaxGarden helps Indian SMEs stay compliant end-to-end — filings, notices, and advisory, all in one place.
Master Compliance Checklist
Week 1 (April 1-7)
- Verify accounting software is updated for new Income Tax Act sections
- Confirm CA is aware of all 8 changes
- Reset GST document series for FY 2026-27
- File LUT for FY 2026-27 (if exporter)
Month 1 (April)
- Update payroll for HRA metro city changes (if applicable)
- Review SGB holdings and exit strategy
- Update logistics cost estimates for revised FASTag charges
- Ensure digital payment 2FA is active on all business accounts
Before Filing (By August 2026)
- Download and verify AIS from e-filing portal
- Collect Form 130 from employer (if applicable)
- Calculate tax under both old and new regimes
- Get tax audit completed (ITR-3 filers)
- File ITR before August 31
The Cost of Ignoring These Changes
Each change has compliance consequences if ignored:
| Change Ignored | Consequence |
|---|---|
| New Act section numbers | TDS returns rejected, vendor TDS credits lost |
| ITR deadline not updated | Filing under old deadline assumption (still fine, deadline extended) |
| HRA metro list not updated | Employees in new metro cities miss higher exemption |
| SGB taxation not accounted | Under-reporting of capital gains, potential notice |
| TCS on education not applied | Penalty for not collecting TCS at source |
| Digital payment 2FA skipped | Transaction failures, payment delays |
Let TaxGarden Keep You Compliant
Tracking 8 simultaneous regulatory changes while running your business is exactly what compliance services exist for. TaxGarden's tax and compliance plans cover every change listed here, from updated filings to payroll adjustments.
Frequently Asked Questions
Do all 8 changes affect every business?
No. Some changes (like SGB taxation and TCS on education) only affect businesses or individuals with specific transactions. But the Income Tax Act change, ITR deadline, and digital payment mandate affect nearly everyone.
Is there a grace period for the new Income Tax Act?
No. The new Act took effect on April 1, 2026. All filings from this date must reference new section numbers and follow the new Act's provisions.
Will my CA automatically update everything?
Not necessarily. Proactively ask your CA about the changes and confirm they are using updated software and section references. Do not assume everything is handled without verification.
Does the HRA change apply retroactively?
No. The expanded metro city list applies from FY 2026-27 onwards. HRA exemption for FY 2025-26 (filed in AY 2026-27) uses the old 4-city list.
Where can I find the official list of all changes?
The Finance Act, Income Tax Act 2025 (published in the Gazette of India), and CBDT notifications are the official sources. ClearTax and similar platforms have published summaries, and TaxGarden covers all changes relevant to SMEs.
