Children's Education Allowance — ₹100 to ₹3,000 per Month

For decades, the children's education allowance stayed frozen at a token ₹100 per month per child — an amount that bore no relation to actual schooling costs. The new rules finally bring this exemption in line with current realities, raising it to ₹3,000 per month per child (maximum two children), translating to an annual exemption of ₹72,000 for employees with two children under the old tax regime.

Hostel Expenditure Allowance — ₹300 to ₹9,000 per Month

The hostel expenditure allowance — meant for employees whose children reside in hostels — was previously capped at an almost meaningless ₹300 per month per child. The revised limit of ₹9,000 per month per child (up to two children) brings a potential annual exemption of ₹2,16,000. This is particularly beneficial for employees whose children attend residential schools or colleges in other cities.

Free Meals from Employer — Exempt up to ₹200 per Meal

The perquisite valuation rules for employer-provided meals have been updated. Meals provided by the employer — whether through an in-house canteen or meal vouchers — are now exempt up to ₹200 per meal, a significant increase from the earlier ₹50 limit. This means meal voucher programmes offered by employers become substantially more tax-efficient for employees.

Form 130 Replaces Form 16 — New TDS Certificate Format

One of the most visible changes in the new rules is the replacement of the widely recognised Form 16 (TDS Certificate for Salary) with Form No. 130. The earlier Form 16 had two parts (Part A and Part B). The new Form 130 introduces a three-part structure, with an additional annexure specifically for specified senior citizens.

This is part of a broader form rationalisation exercise — Form 16A becomes Form 131, Form 26AS becomes Form 168, PAN application Form 49A becomes Form 94, and Form 12BB is replaced by Form 124.

HRA Claims — Mandatory Disclosure of Landlord's PAN and Relationship

The government is significantly tightening scrutiny on House Rent Allowance claims. Under the new Form 124 (replacing Form 12BB), employees claiming HRA must now mandatorily disclose:

(a) The landlord's name, address, and PAN (if annual rent exceeds ₹1 lakh);
(b) The relationship with the landlord — whether the landlord is a spouse, parent, sibling, or other relative.

This is a significant compliance shift. Until now, employers generally accepted rent receipts and PAN details at face value, and genuine verification happened only during scrutiny. With the new disclosure framework, the tax department can automatically cross-verify and flag mismatches — particularly where rent is shown as paid to close family members without genuine financial substance.

Additionally, the new rules expand the 50% HRA exemption (previously limited to Delhi, Mumbai, Chennai and Kolkata) to four more cities — Bengaluru, Pune, Hyderabad, and Ahmedabad — benefiting a large number of employees in India's tech corridors.