New draft Income Tax rules 2026 released: Simplified ITR forms, focus on easier compliance - what common taxpayers should know

New Income Tax Rules 2026: The Income Tax Department on Saturday released the draft Income-tax Rules, 2026. These new rules will become effective from April 1, 2026, that is the start of the financial year 2026-27. There are several changes aimed at simplification in tax filing and ease of compliance in the new draft income tax rules 2026.

In her Union Budget 2026 speech on February 1, FM Nirmala Sitharaman had said, “The simplified Income Tax Rules and Forms will be notified shortly, giving adequate time to taxpayers to acquaint themselves with its requirements. The forms have been redesigned such that ordinary citizens can comply without difficulty.”

New Draft Income Tax Rules 2026: All You Want To Know

The draft income tax rules 2026 lay out detailed provisions on a range of matters, including the manner of calculating the holding period of capital assets in specific situations, the framework for notifying zero coupon bonds, and procedures governing applications submitted by infrastructure-related entities, among other aspects.

The draft rules and accompanying forms have been placed in the public domain for feedback for a period of 15 days. This ends on February 22, 2026. The Central Board of Direct Taxes (CBDT) has said that stakeholders as well as members of the public are encouraged to review the proposals and submit their suggestions, with the objective of making the process of framing subordinate legislation more inclusive and effective, according to an ET report.

Under the proposed draft Income-tax Rules, 2026, the overall number of rules and forms has been reduced. While the existing Income-tax Rules, 1962 has 511 rules and 399 forms, the draft framework brings this down to just 333 rules and 190 forms. This has been done by removing redundancies and merging provisions wherever it has been feasible.

To help stakeholders understand the changes, the government has introduced two navigational tools. One provides a comparison between the earlier rules and the proposed draft rules, while the other looks at the existing forms and compares them to the new draft versions.

New ITR Forms Under Draft Tax Rules

• The Central Board of Direct Taxes has also said that the new Income Tax Return (ITR) forms included in the draft income tax rules have been simplified to make compliance easier for taxpayers.
• Common details have been standardised across different forms to reduce duplication and lower the overall compliance burden.
• The redesigned forms also incorporate features such as automated reconciliation and prefilled information, making the filing process more intuitive while bringing down the likelihood of errors.
• According to the CBDT, these technology-enabled ITR forms are expected to simplify filing and improve the overall user experience.
• The new system will also support centralised processing and data-based decision-making, allowing technology to be used more effectively to enhance taxpayer services.
• Additionally, the wording of the ITR forms has been made clearer. This has been done with the aim to minimise operational, administrative, and legal uncertainties.

Riaz Thingna, Partner, Grant Thornton Bharat on draft Income Tax Rules says, “The draft Income Tax Rules 2026 signal a clear shift towards simplification and certainty for taxpayers. For the common man, measures such as expanded use of pre-filled returns, clearer reporting thresholds, and faceless assessments can reduce errors and unnecessary personal interface with the tax department.”

Kuldip Kumar, Partner, Mainstay Tax Advisors says that a quick look at the draft rules relating to the valuation of perquisites suggests a significant impact on salaried taxpayers, with several limits proposed to be recalibrated vis-à-vis those prescribed under the Income Tax Rules, 1962.

“While certain proposals such as increasing the threshold for interest-free loans, enhancing the limit for tax free gifts in kind and provision of free food may benefit employees, changes relating to one of the most common perquisites, namely car benefit, is likely to result in a higher tax burden. The valuation of employer-provided cars used for both official and personal purposes, where running expenses are borne by the employer, has been proposed to increase substantially (from Rs 1,800/Rs 2,400 per month to Rs 5,000/ Rs 7,000 per month). In addition, the valuation for the provision of a driver has been proposed to rise sharply from Rs.900 to Rs.3,000 per month,” Kuldip Kumar tells TOI.

According to Sandeepp Jhunjhunwala, Partner at Nangia Global, the language used in the ITR forms has been made clearer and more user-friendly to minimise operational, administrative, and legal ambiguities, while explanatory notes have also been simplified.