The government has proposed an overhaul of India’s tax compliance framework through the draft Income-tax Rules, 2026, aiming to simplify procedures, reduce paperwork and expand technology-driven administration. The new rules are likely to be notified in the first week of March this year and come into force from April 1.
A central feature of the reform is a sharp reduction in regulatory complexity. Under the existing Income-tax Rules, 1962, taxpayers navigated 511 rules and 399 forms. The draft 2026 framework proposes to compress this to 333 rules and 190 forms, cutting the number of forms by more than half.
The rationalisation is intended to remove duplication, align procedures with the Income-tax Act, 2025, and simplify compliance for both individuals and businesses.
Shift to smart forms
The proposed system introduces forms with pre-filled data, automated reconciliation and simplified language. According to the senior CBDT officials, these features are designed to reduce filing error, minimise manual data entry, eliminate ambiguity in instruction, and enable faster processing and verification.
Earlier forms were only partially technology-enabled, creating reporting burdens across an estimated 12–13 crore cases submitted to reporting agencies. The redesign aims to ease this load and improve system logic.
The senior finance ministry officials explained that the overhaul signals a broader policy shift toward centralised, technology-based compliance management, with many benefits. These will help in reducing litigation through clearer rules; expanding the tax base via improved reporting; simplifying administration for tax authorities and improving taxpayer convenience.
Recent filing data indicates around nine crore income-tax returns in FY25, with roughly 12 crore individuals within the tax net, though not all file returns. There is a nudge towards people who pay tax, but do not file return to do so. The CBDT officials said last year over 11 crore revised or updated returns were received, indicating that compliance was increasing.
Draft rules and forms have been available on the CBDT website till February 22, for public consultation. Stakeholders can submit rule-wise and form-wise feedback.
To aid transition, the government has released navigational tools mapping where old rules can be compared to to new provisions, and existing forms to draft replacements.
Notification of the rules is anticipated by the first week of March 2026 after incorporating necessary changes.
Implementation timeline
Taxpayers filing returns for FY 2025-26 can continue to do so under existing rules, while individuals liable to pay advance tax for FY26 can do so in the new rules.
