Income Tax Rules 2026: The Union Government has notified the Income Tax Rules 2026, offering the final regulatory framework for the Income Tax Act 2025 that would replace the 65-year-old tax laws of 1961.
The new regime would go live on 1st April 2026 and would see reduced sections to 536 from 800 while also cutting down the count of chapters to 23 from 47. Issued by the Central Board of Direct Taxes (CBDT), the notification has confirmed a huge structural overhaul.
Income Tax Rules 2026-New Updates
The Income Tax Act 2025 eliminates the “previous year” and “assessment year” confusion. Going forward, the year in which the income is earned by an individual or a business would also be the year in which it gets computed and taxed. This would help in the simplification of income tax for millions of Indian residents and businesses.
DON'T MISS
House Rent Allowance (HRA)
The new HRA would now also extend to cities like Pune, Hyderabad, Bengaluru and Ahmedabad along with Mumbai, Kolkata, Delhi and Chennai. Individuals living in these cities could now claim HRA exemptions up to 50 percent of their salary while those in other locations could claim up to 40 percent.
Children’s Education, Hostel And Other Allowances
The new children education rules have increased the allowance from Rs. 100 to Rs. 3000 per month per child (for a maximum of 2 children). The hostel expenditure allowance has been raised to Rs. 9000 per month from Rs. 300 a month.
Tax-Free Income Threshold
The tax-free income threshold would remain the same in FY26-27 as in FY25-26. Individuals who file standard returns like ITR-2 and ITR-1 would now have to submit their income tax returns by July 31. On the other hand, those with professional or business income not needing audit would have to submit by August 31 while those requiring audit would have to submit by October 31. Special cases would have to submit their income tax returns by November 30. These timelines would come into effect from the tax year 2026-27.
