Income Tax department releases draft rules for New Income Tax Act, invites feedback till February 22

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• Draft Income-tax Rules, 2026 open for feedback until Feb 22, 2026
• New rules simplify compliance, reduce litigation under 2025 Income Tax Act
• Forms and procedures are being streamlined for easier, tech-driven tax filing

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The Income Tax Department has put out the draft Income-tax Rules, 2026, which is the detailed procedural framework for the New Income Tax Act, 2025 from April 1, 2026. The move marks the next step in India’s biggest direct-tax overhaul , aimed at simplifying compliance and reducing litigation.

"We all remember that on Budget Day, the Hon’ble Finance Minister had clearly stated that the new Income-Tax Forms and Rules would be released soon, so that taxpayers and professionals are not caught unprepared ahead of the new Act. Now, with the Income-tax Act, 2025 scheduled to come into force from 1st April 2026, the Government has taken an important step by placing the Draft Income-tax Rules, 2026 and the proposed forms in the public domain for stakeholder consultation," said Himank Singla, Founding Partner, SBHS & Co.

While the new Act lays down the law, the rules explain how taxpayers, professionals and authorities will implement it in practice from valuation norms to filing formats. The draft has been opened for stakeholder feedback before final notification till February 22, 2026.

"The income tax department has released draft rules for New Income Tax Act. It helps in understanding professionals the procedurals aspects of the Act. The Income Tax Axt , 1961 contains 511 rules which are now reduced to 323, making the New Act simpler," said Pratibha Goyal, a New Delhi based Chartered Accountant.

Simpler framework replacing decades-old system

The proposed rules will replace the Income-tax Rules, 1962 that operated alongside the Income-tax Act, 1961 for over six decades. The government’s objective is to modernise administration and make the law easier to interpret and apply.

It also aims to make tax filing more user-friendly and efficient as part of a broader compliance-simplification push.

"What is particularly significant is that the drafting philosophy follows the broader intent of the new Income-tax Act itself, which is simplification, removal of redundancy, and better readability. The draft rules aim to use simpler language, supported by tables and formulas wherever required, so that compliance becomes less interpretational and more objective," said Singla.

On the compliance side, the draft forms have also been rationalised. The Government has indicated that forms are being standardised across categories, with smarter design features such as automated reconciliation, pre-fill capabilities, and technology-driven processing.

"This is expected to reduce errors, improve taxpayer experience, and enhance the efficiency of centralised processing systems," added Singla.

Key areas covered

The draft rules provide operational clarity on several practical aspects, including:

Determination of fair market value (FMV) of assets

Method to compute holding period of capital assets

Simplified income-tax return formats

Standardised procedural compliance requirements

These procedural clarifications are critical because ambiguity in rules historically triggered most disputes between taxpayers and the department.

What happens next

The draft rules are not final yet. Stakeholders including tax professionals, industry bodies and corporates can submit suggestions before notification. After revisions and approval, the rules will come into force alongside the new Act from April 1, 2026.

"The new ITR forms are also expected to be out soon following the release of draft rules," said Goyal.