NEW DELHI, Mar 20: The Central Board of Direct Taxes (CBDT) on Friday notified rules under the Income-tax Act, 2025, aimed at simplifying tax laws while providing enhanced benefits for salaried individuals, particularly on house rent allowance (HRA).
The newly framed Income-tax Rules, 2026 will come into effect from April 1, operationalising the simplified direct tax regime approved by Parliament last year.
According to a gazette notification, the rules will be called the Income-tax Rules, 2026 and will take effect from April 1, 2026.
Parliament had passed the new Income Tax Bill on August 12, 2025, replacing the decades-old Income Tax Act, 1961. While no new tax rates have been introduced, the legislation focuses on simplifying language and improving clarity in tax provisions.
The revamped law reduces the number of sections from 819 to 536 and chapters from 47 to 23, while also cutting down the overall word count significantly. It introduces 39 tables and 40 formulas to make provisions easier to understand.
The rules also tighten regulations related to capital gains, stock market transactions, and non-resident taxation, while simplifying compliance and disclosure requirements.
More than 150 official forms have been introduced under the new framework, covering a wide range of tax-related processes.
For HRA exemptions, the rules retain the existing structure, allowing higher exemption limits of 50 per cent of salary for eight major cities—Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, and Bengaluru—while other locations will continue with a 40 per cent limit.
Additionally, taxpayers will now be required to disclose landlord-tenant relationships when claiming deductions. The rules also place greater responsibility on auditors and companies, particularly in verifying tax credits on foreign income and checking PAN-related discrepancies.
The notification further clarifies the calculation of holding periods for assets in determining capital gains, including provisions for converted securities such as shares and debentures, where the holding period of the original instrument will also be considered. (Agencies)
