In the Draft Income Tax Rules 2026 issued by the Central Government, it has been proposed to increase the limit of many important allowances and tax exemptions. These drafts are open for public opinion till 22 February 2026. If approval is obtained from the Parliament, then the employees choosing the old tax system can get big relief.
In the draft, there is a proposal to increase the exemption limit for loans available at interest-free or concessional rates from Rs 20,000 to Rs 2 lakh. It has been said that children's education allowance will be increased from Rs 100 to Rs 3,000 per month and hostel allowance from Rs 300 to Rs 9,000 per month.
Apart from this, it is suggested to increase the tax exemption on free meals from Rs 50 to Rs 200 per meal and the limit on gift vouchers from Rs 5,000 to Rs 15,000 annually. 50% exemption of HRA (House Rent Allowance) is now proposed to be implemented in cities like Bengaluru, Hyderabad, Pune and Ahmedabad also.
Tax experts say that increasing the limit of these exemptions will reduce the taxable portion of the salary. This can reduce the tax liability of employees without increasing the salary and bring more net income.
According to chartered accountants, if a person takes full advantage of all the allowances and deductions like 80C and 80D, then the tax on a salary of Rs 15 lakh can come to around Rs 41,496, which is much less than Rs 97,500 under the new tax system. Similarly, additional savings of about Rs 63,856 are possible on a salary of Rs 20 lakh and about Rs 66,456 on a salary of Rs 25 lakh. If these proposals are implemented then the utility of the old tax system may increase again. Through proper tax planning, the salaried class can significantly reduce their tax liability.
