MC EXCLUSIVE Govt to notify all rules under new income tax law by December 31

In tax administration, rules lay down the detailed procedures to operationalise provisions in the main tax law

The government is targeting December 31 to notify all the rules under the upcoming new income tax law through a single consolidated notification, marking a major step in putting in place the operational backbone of the new Act, a senior government source said.

The new tax framework will be supported by around 400 rules and 180 forms – significantly fewer than the 500-plus rules under the earlier structure – in a move aimed at simplifying compliance and streamlining administration, the official told Moneycontrol.

“By December 31, we will notify all the rules in one consolidated notification. Budget work will also start simultaneously. Systems will have a lot of work — we will test the rules, do a test run, and coordinate extensively in the fourth quarter,” the official said.

In tax administration, rules lay down the detailed procedures to operationalise provisions in the main tax law – such as how liabilities will be computed, refunds processed, or exemptions applied. Forms, on the other hand, are the standardised templates through which taxpayers and businesses furnish information, file returns, or make claims. Together, these rules and forms form the operational core of any tax regime.

Systems integration

Once the rules are notified, extensive backend work will continue through the fourth quarter of FY25 to ready the IT infrastructure. According to the official, forms are being compiled and merged, and prototypes will be created and tested before they are enabled on the system.

“Before enabling the forms on the system, after notification, utilities will be formed. Prototypes will be tested, integrated with data, and checked. Each form requires detailed development, integration, and test checking. This work will intensify in the fourth quarter,” the official added.

The systems integration exercise will run in parallel with Budget preparations, making the last quarter of the financial year a crucial phase in the transition to the new regime.

What is the new income tax law?
The government is overhauling the existing Income Tax Act, 1961 to introduce a simplified and modernised legal framework. The new law aims to reduce litigation, improve ease of compliance, and align tax administration with contemporary economic realities.

When will the rules be notified?
All rules under the new law are planned to be notified by December 31, through a single consolidated notification. This will provide taxpayers, businesses, and system developers sufficient time to understand and test the new framework ahead of rollout.

What are “rules” and “forms” in a tax regime?

Rules specify the detailed procedures to implement the provisions of the main tax law. This includes how liabilities are calculated, refunds processed, or exemptions applied. Forms are standardised templates used by taxpayers and businesses to furnish information, file returns, or make claims. Together, they form the operational core of any tax system.

How many rules and forms will the new framework have?
The new regime will have around 400 rules and 180 forms, significantly fewer than the 500-plus rules under the existing framework. This reduction is aimed at simplifying the tax system and easing compliance burdens.

What happens after the rules are notified?
Following notification, the government will undertake extensive systems integration and testing in the fourth quarter of FY25. This includes creating utilities, developing and testing form prototypes, integrating data, and ensuring the IT infrastructure is fully ready before the law takes effect.