Legislative Updates for the Tax Year 2026 – 2027

The legislative changes for India for the tax year 2026-2027 include changes to perquisites, allowances, new metro cities for calculating the house rent allowance (HRA), and changes in exemption conditions for leave travel assistance (LTA), 

Here’s the summary of legislative changes for India for the tax year 2026-2027.

Legislative Updates 2026

Provisions	Impact on Product
Perquisites Free concessional education Small interest free loans provided by the employer Free food and beverages Gift Voucher Motor car perquisite	The taxable value of these perquisites is reduced.  The predefined value definitions are updated.
Allowances Child Education Allowance Hostel expenditure Allowance Transport Allowance for Physically Disabled Under Ground Allowance	The tax exemption for these allowances is increased. The predefined value definitions are updated.
Deduction under 80CCD(2) on employer contributions for NPS or any other pension scheme notified by the government	The deduction under 80CCD(2) on employer contribution for NPS or any other pension scheme notified by the central government for the New Tax Regime is increased from 10% to 14% of the salary. The predefined value definitions are updated. The calculation logic and formula changes have been delivered.
More cities have been added as metro cities for calculating House Rent Allowance	The HRA exemption calculation will change for the employees living in the newly added metro cities. No product changes are delivered.
The exemption conditions for Leave Travel Assistance have been modified	The LTA claims for air travel and road travel are impacted No product changes are delivered.

 Perquisites Value Definition Modifications

Value Definition Name	Old Value	New Value
Education concession limit for children	1000	3000
Concessional loan exemption limit	20000	200000
Free meal limit for employees	50	200
Gift voucher limit for employees	5000	15000
Perquisite Private Motor Car Driver Limit	900	3000
Perquisite Employer Motor Car Expenses Under 1600CC	5000	5000
Perquisite Employer Motor Car Expenses Above 1600CC	2400	7000
Perquisite Employee Motor Car Expenses Under 1600CC	1800	2000
Perquisite Employee Motor Car Expenses Above 1600CC	900	3000

Allowance Value Definition Modifications

Value Definition Name	Old Value	New Value
Children Education Allowance	100	3000
Hostel Expenditure Allowance	300	9000

HRA Allowance

The cities Ahmedabad, Bengaluru, Hyderabad, and Pune have been included in the list of metro cities eligible for 50% salary criterion (instead of the earlier 40%) for the purpose of computing House Rent Allowance (HRA) exemption.

You need to advise your employees to select the Metro flag in their investment declaration while claiming HRA for the cities Ahmedabad, Bengaluru, Hyderabad and Pune.

LTA Allowance

You need to follow the updated LTA rules while approving the LTA claims.

For detailed information of all the changes, see India Legislative Announcements 2026-27 Q2 V1.

Stay compliant with legislative changes introduced for the tax year 2026. 

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For more information see India Legislative Announcements 2026-27 Q2 V1.