New Delhi: The Central Board of Direct Taxes (CBDT) on Friday notified the Income Tax Rules, 2026, laying down the operational framework for the Income Tax Act 2025. The new rules will come into force from April 1, 2026.
The government said the objective is not to introduce new tax rates but to simplify tax laws, eliminate redundant provisions and enhance clarity in compliance.
HRA norms revised
Under the new rules, salaried employees claiming House Rent Allowance (HRA) will see some key changes. The exemption limit remains up to 50% of salary for metro cities such as Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru, while it continues at 40% for other cities.
A new provision mandates declaration of the landlord-tenant relationship, aimed at improving transparency in claims.
Push for simplification
The revised framework significantly trims the size and complexity of the tax code:
- Sections reduced from 819 to 536
- Chapters brought down from 47 to 23
- Word count cut from 5.1 lakh to 2.6 lakh
- Introduction of 39 tables and 40 formulas to replace dense legal language
Tighter compliance measures
The new rules also introduce stricter compliance in areas such as capital gains taxation, stock market transactions and non-resident taxation. Over 150 forms—starting from Form 33—have been prescribed to streamline reporting.
For companies and auditors, the framework mandates verification of foreign tax credits, compulsory PAN validation and audit-based determination of tax liability.
Clarity on capital gains
The rules provide clearer guidelines on determining the holding period of assets. In the case of convertible securities, the original investment period will now be considered while calculating capital gains.
Overall, the Income Tax Rules, 2026 aim to create a simpler yet more compliance-driven tax regime, offering greater clarity to taxpayers while strengthening enforcement mechanisms.