New Income Tax Act: This new proposed framework will replace the 1962 rules that have been in place for the past six decades. The most significant feature of the new rules is that the old 511 rules have been reduced to just 323, making the entire system more understandable and shorter.
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New Income Tax Act: The Income Tax Department has released the draft Income Tax Rules, 2026. This will prepare a detailed structural framework for the ‘New Income Tax Act, 2025’, which will come into effect from April 1, 2026. This move, the biggest change in India’s direct tax history, aims to simplify tax rules and reduce legal disputes. The government has put these rules out for public discussion so that taxpayers and professionals can prepare in advance and provide feedback by February 22.
A simplified and modern framework will replace the 60-year-old system
This new proposed framework will replace the 1962 rules that have been in place for the past six decades. The most significant feature of the new rules is that the old 511 rules have been reduced to just 323 rules, making the entire system more understandable and shorter. The government’s effort is to modernize tax administration and simplify the language so that there is no hassle of interpretation in tax filing.
Rationalization will occur with technology-based smart forms
Tax forms have also been modernized and rationalized under the new rules. They include smart design features such as automated reconciliation and pre-fill capabilities. This use of technology will reduce human errors during tax filing, improve the taxpayer experience, and increase the efficiency of the processing system.
Clarity will be provided in these key areas
The draft rules provide operational clarity on several practical aspects. These include the determination of the fair market value of assets, the method for calculating the holding period of capital assets, and the new simplified Income Tax Return (ITR) format. Since historically, most disputes have arisen due to ambiguity in the rules, these procedural clarifications are considered very important.
These draft rules are not yet final. Necessary amendments will be made based on suggestions received from tax professionals, industry bodies, and corporations. Once approved, these rules will become effective with the new Income Tax Act from April 1, 2026. Along with this, it is expected that new ITR forms will also be made public soon.
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