Govt notifies income tax rules 2026

The Government of India on March 20 notified the Income Tax Rules, 2026, ushering in a significant overhaul of procedural and compliance systems under direct taxation. The rules will come into force from April 1, 2026, aligning with the implementation of the Income-tax Act, 2025.

Key Highlights of the New Rules

Comprehensive Reform: The new rules replace older procedural frameworks with:

• Updated definitions
• Streamlined compliance structures
• Modern reporting mechanisms

Tighter Dividend Regulations

• Companies must maintain share registers
• Mandatory general meetings for dividend declaration
• Dividends must be paid only within India
  -Aimed at ensuring stronger domestic oversight of dividend distribution

Strengthened Stock Exchange Compliance

• Exchanges must maintain audit trails for 7 years
• Deletion of transaction records prohibited
• Mandatory monthly reporting of modified transactions
  • Enhances transparency and data integrity in capital markets

Capital Gains Clarity: Clear guidelines introduced for complex scenarios:

• Debenture conversions
• Income disclosure schemes
• Cross-border restructuring

Zero Coupon Bonds Framework: A structured framework has been introduced with stricter norms:

• Prior application 3 months before issuance
• Investment-grade ratings from two agencies
• Clearly defined fund utilization timelines

Cross-Border Taxation Powers Enhanced: Tax authorities now have wider powers to estimate income of non-residents using:

• Percentage-based methods
• Global profit ratios
• Other reasonable benchmarks

Digital Economy Taxation: Significant Economic Presence (SEP) threshold set at:

• ₹2 crore in transactions, or
• 3 lakh users
  • Targets taxation of digital and remote businesses

Revised HRA Norms: More cities now qualify for higher House Rent Allowance (HRA) tax exemption, including: Hyderabad, Pune, Ahmedabad, Bengaluru.

New Tax Forms Introduced

• Form 26AS → replaced by Form 168
• Form 16 → replaced by Form 130
  • Part of broader digitisation and simplification efforts