New Income Tax Rules 2026: Stricter Compliance, Simpler Filing from 2026

The Central Board of Direct Taxes (CBDT) has published the Income-tax Rules, 2026 in the e-Gazette, replacing earlier provisions and laying down a detailed framework for the upcoming financial year 2026-27.

The new rules aim to simplify procedures while tightening reporting standards across key areas such as capital gains, stock market transactions and non-resident taxation.

The rules come after draft proposals released earlier this year and are part of a broader effort to modernise India's tax system.

"The changes do not introduce new taxes but instead focus on better monitoring and transparency through enhanced disclosures and digital tracking," according to the official notification.

One of the key highlights is related to house rent allowance (HRA). The rules retain the existing structure, under which salaried employees in cities like Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Hyderabad, Pune and Ahmedabad can claim up to 50 per cent of their salary as exemption.

For other cities, the limit remains at 40 per cent. However, taxpayers will now also need to disclose their relationship with the landlord in a specified form, adding a new layer of transparency.

The rules also set stricter conditions for stock exchanges to qualify as recognised platforms for derivatives trading.

Exchanges will need approval from SEBI and must maintain detailed records of all transactions, including client-level data such as PAN and unique IDs.

They are required to keep audit trails for seven years and submit monthly reports to the tax department, ensuring tighter oversight of trading activities.

In addition, the government has clarified how the holding period of assets will be calculated to determine whether capital gains are short-term or long-term.

In cases of converted securities, the holding period will include the time for which the original asset was held.

For assets declared under the Income Declaration Scheme, 2016, different rules will apply depending on the type of asset.

The rules also bring clarity on taxation of capital gains for certain entities. Gains linked to short-term assets or self-generated assets like goodwill will be treated as short-term, while others will be classified as long-term depending on the nature of the underlying asset.

- IANS