The Indian government has released Draft Income-Tax Rules, 2026, designed to support the implementation of the new Income Tax Act, 2025, which is expected to take effect from April 1, 2026. These draft rules have been published for public feedback and include several changes aimed at making income tax compliance simpler and more user-friendly for taxpayers.
One key proposal under the draft rules is a simplified process to select between the new and old income tax regimes. While the new regime offers lower tax rates and simpler filing, many taxpayers still benefit from deductions and exemptions available under the old regime. The draft framework is expected to make it easier for individuals to evaluate which option is better suited to their financial situation and switch between the two based on clear guidance and updated allowances.
The draft rules significantly reduce the number of tax rules and forms, consolidating the framework to around 333 rules and 190 forms from the much larger existing set — a move that will reduce complexity and help taxpayers file returns more easily. Many exemptions and allowances (such as House Rent Allowance, education allowance, and other employee benefits) have been revised to reflect current economic conditions, which may affect calculations under both regimes.
Officials say that these changes could make the old tax regime more attractive again for some taxpayers by expanding exemptions and increasing benefit limits that had not been updated in decades. This is expected to create a real choice rather than a one-size-fits-all situation. Experts note that taxpayers should carefully calculate their liabilities under both regimes to choose the most beneficial option for their circumstances.
The draft rules will remain open for suggestions and comments from the public and stakeholders until a specified deadline before they are finalised and officially notified by the government. Once finalised, they will guide taxpayers and professionals in filing returns and claiming deductions under the new tax law.
