Income Tax Rules 2026 notified: What changes for you?
What's the story
The Indian government has notified the Income Tax Rules, 2026, to implement the new Income Tax Act, 2025. The rules will come into effect from April 1, 2026, and aim to tighten compliance in capital gains, stock exchange reporting and non-resident taxation. They also introduce clearer valuation norms and disclosure requirements for financial instruments like zero-coupon bonds.
Tax adjustments
HRA exemptions framework retained for salaried taxpayers
The new rules retain the proposed framework for house rent allowance (HRA) exemptions for salaried taxpayers. Eight cities—Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru—will have a higher exemption limit of 50% of salary. Other locations will continue at 40%. Taxpayers will also have to disclose their relationship with the landlord in Form 124 under these revised regulations.
Exchange regulations
New criteria for recognized stock exchanges
The government has also laid down new criteria for a stock exchange to be recognized under section 2(92) for derivatives trading. Exchanges must have SEBI's prior approval and comply with its regulations while ensuring robust client-level data capture. They have to maintain a complete audit trail of all cash and derivatives transactions for seven years, with strict safeguards against record deletion and modifications only in cases of genuine errors.
Financial reporting
Enhanced reporting for financial instruments
The Income Tax Rules, 2026, also mandate enhanced reporting for financial instruments such as zero-coupon bonds. They establish thresholds for significant economic presence, signaling a broader effort to enhance tax transparency and align India's tax regime with global standards. These changes are part of the government's larger strategy to simplify compliance and align procedural provisions with the updated law under the new Income Tax Act.