CBDT Unveils Draft Income-tax Rules, 2026 for Public Consultation: Comprehensive Overhaul of Tax Framework

The Central Board of Direct Taxes has initiated a public consultation process by releasing the Draft Income-tax Rules, 2026, along with supporting documentation and forms for review by stakeholders. This development represents a significant step in the preparation for implementing the Income-tax Act, 2025, which shall become operational from 1st April 2026. The revenue authorities have provided a window of 15 days for submission of feedback, with the deadline set for 22nd February 2026, demonstrating a commitment to collaborative policymaking in tax administration.

Strategic Approach to Rule Drafting

The methodology adopted for formulating these draft rules follows the same fundamental principles that guided the creation of the Income-tax Act, 2025. The regulatory authorities have prioritized linguistic simplification, making the provisions more comprehensible for ordinary assessees. Mathematical formulas and tabular presentations have been incorporated wherever beneficial to enhance clarity. A conscious effort has been made to remove overlapping provisions and redundancies that existed in the Income-tax Rules, 1962. While maintaining the core policy objectives intact, several modifications have been introduced to ensure consistency with the provisions of the Income-tax Act, 2025.

Revolutionary Changes in Form Design

The forms accompanying these draft rules have undergone substantial redesign with the objective of minimizing compliance difficulties for assessees. A standardization exercise has been undertaken to ensure consistency in common data fields across different forms, thereby reducing the burden of repetitive information submission. The new forms incorporate intelligent features enabling automatic reconciliation and pre-population of data fields, making the filing process more intuitive and reducing the likelihood of errors. These technologically enhanced forms are expected to significantly improve the filing experience while enabling centralized data processing and evidence-based administrative decision-making. The language used in forms has been simplified to eliminate operational, administrative, or legal ambiguities. Explanatory notes accompanying forms have been made more user-friendly and concise.

Massive Consolidation Exercise

The rationalization undertaken in drafting the new rules aims to simplify regulatory provisions, thereby improving comprehension and understanding among assessees. The proposed procedural simplifications are designed to enhance ease of living and facilitate business operations across all categories of assessees. The simplification of forms combined with technological integration is anticipated to deliver substantial convenience to users.

Quantitative Impact

The existing Income-tax Rules, 1962 comprises 511 rules and 399 forms. Through extensive consolidation, elimination of redundancies, and merger of related provisions, the Draft Income-tax Rules, 2026 contains only 333 rules and 190 forms, representing a reduction of approximately 35% in rules and 52% in forms.

To facilitate the review process, two comprehensive navigation documents have been released alongside the draft rules and forms. The first navigator provides a detailed mapping between the old rules and the new draft rules, while the second navigator maps old forms to new draft forms. This mapping exercise enables stakeholders to provide rule-specific and form-specific feedback systematically.

Key Areas Covered in Draft Rules

Foundational Provisions

The draft rules commence with standard provisions regarding short title, commencement dates, and comprehensive definitions. Special attention has been given to defining technical terms that appear throughout the rules to ensure uniformity in interpretation.

Income Computation and Classification

Multiple rules address the determination of income under various heads, including:

  • Computation of salary income and valuation of perquisites
  • Determination of income from house property, including treatment of unrealized rent
  • Provisions relating to business and profession income
  • Capital gains computation in various scenarios
  • Income from other sources

Deductions and Exemptions

Substantial provisions govern the claiming of deductions under various sections of the Act, including:

  • Scientific research expenditure under section 45
  • Donations to charitable institutions under section 47
  • Deductions available to non-profit organizations
  • Relief for salary paid in arrears
  • Deductions for medical treatment of specified diseases

International Taxation Framework

A comprehensive set of rules addresses international taxation matters: