Filing returns now easier, Centre issues notification for Income Tax Rules 2026

New Delhi (The Uttam Hindu): The central government on Friday issued a notification for the Income Tax Rules, 2026. This will set the stage for the new Income Tax Act 2025, which is scheduled to come into effect from April 1, 2026, with a focus on transparency, more stringent disclosures, and improved compliance.

The Central Board of Direct Taxes (CBDT) has published the Income Tax Rules, 2026 in the e-gazette, which replace earlier provisions and set out a detailed framework for the upcoming financial year 2026-27. The new rules aim to simplify processes and tighten reporting standards related to capital gains, stock market transactions, and NRI taxes. These rules follow draft proposals issued earlier this year and are part of a broader effort to modernize India's tax system. According to the official notification, "These changes do not introduce any new taxes, but focus on improved monitoring and transparency, which will require greater disclosure and digital tracking."

The biggest highlight of the Income Tax Rules, 2026 is the House Rent Allowance (HRA). Under the new rules, residents of Bengaluru, Hyderabad, Pune, and Ahmedabad can now claim HRA up to 50 percent of their salary. Previously, this limit was only applicable to those living in cities like Mumbai, Delhi, Chennai, and Kolkata. However, for other cities, this limit remains at 40 percent. Taxpayers will also be required to disclose their relationship with their landlord in a specified form, further improving transparency.

These rules also set strict conditions for stock exchanges to be recognized as authorized platforms for derivatives trading. Exchanges must obtain SEBI approval and maintain detailed records of all transactions, including client-level data such as PAN and unique ID. They must maintain an audit trail for seven years and submit monthly reports to the tax department to ensure strict monitoring of trading activities. Additionally, the government has clarified in the new Income Tax Rules 2026 how the holding period of assets will be calculated to determine whether capital gains are short-term or long-term. For assets declared under the Income Declaration Scheme, 2016, different rules will apply depending on the type of asset. These rules also clarify the taxation of capital gains for certain entities. Gains associated with short-term assets or self-created assets will be considered short-term, while others will be classified as long-term, depending on the nature of the underlying asset.