CBDT notifies new Income Tax rules; HRA benefits enhanced, disclosures tightened

New Delhi: The Central Board of Direct Taxes on Friday notified the Income-tax Rules, 2026, laying down the operational framework for the revamped Income-tax Act, 2025, which comes into force from April 1.

The new rules introduce enhanced tax benefits for salaried individuals claiming house rent allowance (HRA), while simultaneously tightening disclosure norms by making it mandatory to declare the landlord-tenant relationship to avail deductions.

Also Read: Good news for salaried employees in these cities as they can get higher HRA exemption


“These rules may be called the Income-tax Rules, 2026. They shall come into force on April 1, 2026,” the government said in a gazette notification.

The rules are designed to implement the simplified direct tax regime approved by Parliament last year, replacing the decades-old Income Tax Act, 1961. The overhaul does not introduce new tax rates but focuses on simplifying language, removing redundant provisions, and improving clarity in compliance.

The new law significantly trims the structure of the tax code—reducing the number of sections from 819 to 536 and chapters from 47 to 23—while cutting the word count nearly in half, from over 5.1 lakh to 2.6 lakh. In a notable shift, it also introduces 39 tables and 40 formulas to replace dense legal text.

HRA relief retained, expanded clarity

Under the new rules, eight cities - Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, and Bengaluru - will qualify for a higher exemption limit of 50 per cent of salary, while all other locations will continue at 40 per cent.

Also read: New tax rules notified: From HRA to company car to meal card, top 5 prominent changes which will impact salaried taxpayers

At present, salaried employees in Mumbai, Delhi, Kolkata, and Chennai are allowed to claim HRA exemption of up to 50 per cent of their salary, while those living in other locations are eligible for a lower limit of 40 per cent.

Stricter compliance, wider reporting

The rules also introduce stricter compliance requirements across several areas, including capital gains taxation, stock market transactions, and non-resident taxation, while simplifying certain disclosure processes.

More than 150 forms—starting from Form 33 onwards—have been notified, covering a wide range of tax-related filings and procedures.

Auditors and companies will shoulder greater responsibility under the new regime. They will be required to more rigorously verify tax credit claims on foreign income, check duplication of Permanent Account Numbers (PAN), and assess tax liabilities arising from adverse audit observations.

Clarity on capital gains

The notification also provides greater clarity on determining the holding period of assets—a key factor in categorising gains as short-term or long-term.

For converted securities such as shares or debentures, the holding period will now include the duration for which the original instrument—such as bonds or deposit certificates—was held prior to conversion, offering a more consistent approach to tax treatment.

Overall, the new rules mark a shift towards a simpler yet more compliance-driven tax framework, aiming to balance ease of understanding with tighter enforcement as India transitions to its modernised direct tax regime.