New Delhi. The Central Board of Direct Taxes (CBDT) has notified the Income Tax Rules, 2026, which will come into force from April 1, 2026, under the new Income Tax Act 2025. This new law will replace the 64 year old Income Tax Act 1961. The government says that this will make the tax system more simple, transparent and dispute-free.
Although there has been no change in the tax rates or slabs, many important changes have been made in the rules, which will impact working people, investors and businessmen. During the launch of the nationwide awareness campaign ‘Prarambh 2026’ last Friday, Finance Minister Nirmala Sitharaman said that this new tax structure will make compliance much easier for small taxpayers and will help in reducing litigation.
He said that India’s small businessmen and professionals are the ‘real strength of the economy’. The Finance Minister said that the new law has been designed in such a way that it reduces errors, disputes and compliance costs and changes people’s behavior from ‘confusion to compliance’. He also said that reducing litigation should be the main objective of this new framework.
The newly notified rules include several changes related to salary tax, compliance reporting, transfer pricing and foreign tax credit. Under the new rules, now there will be only one ‘tax year’ instead of ‘financial year’ and ‘assessment year’. This will make the process of paying tax easier and people will not need to understand different terms.
Besides, the deadline for filing returns has also been fixed, in which for ordinary ITR, 31st July, for business and profession ones, 31st August, while in audit cases, returns will have to be filed by 31st October. In special circumstances this deadline may extend till November 30. Apart from this, now revised returns can be filed up to 12 months after the end of the tax year.
New rules have been implemented regarding House Rent Allowance (HRA). Now it will be mandatory for employees to provide information about the relationship between the landlord and the tenant to get the discount. The good thing is that now employees living in Mumbai, Delhi, Kolkata, Chennai along with Hyderabad, Pune, Ahmedabad and Bengaluru will get HRA exemption up to 50 percent of the salary. In other cities this limit will remain only 40 percent. If a person pays more than Rs 1 lakh as rent in a year, it will be necessary for him to provide the PAN of the landlord.
Under the new law, businesses with turnover up to Rs 10 crore will be exempted from maintaining detailed books of accounts and getting audited, subject to certain conditions. This will prove to be a big relief for businessmen. Under the new rules, the tax value of the house (perquisite) given by the company has been reduced. Now it will be decided on the basis of the population of the city – 10 percent of the salary in cities with population more than 40 lakh, 7.5 percent in medium cities and 5 percent in small cities. Earlier this rate was up to 15 percent, which will provide relief to the employees.
Tax rules on use of company car have also changed. If the employee uses the car for both personal and office purposes, the taxable value per month will be Rs 5,000 for a car up to 1.6 liters and Rs 7,000 for a car above that. If the company provides a driver, another Rs 3,000 will be added to it. The limit of tax exemption on food and beverages served to employees has been increased to Rs 200 per meal, which was earlier Rs 50. Gifts or vouchers given by the company will now be tax-free up to Rs 15,000.
Along with this, huge relief has also been given on children’s education allowance. Now tax exemption up to Rs 3,000 will be available every month (maximum for two children). There will be a rebate of up to Rs 9,000 per month on hostel allowance, which was much less earlier. It has also been clarified in the new system how the period for which an investment is held will be decided. Especially in case of convertible securities (like bonds to shares), the earlier holding period will also be included.
This will make it easier to decide whether the benefits are short term or long term. The new Income Tax Law is being considered a big step towards making the tax process easy and transparent for the common people. While on one hand the rules have been tightened, on the other hand relief has also been given in many places. This will make tax filing easier, reduce disputes and help people do their financial planning in a better way.
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