The government will soon roll out new income tax forms, rules and detailed FAQs ahead of the implementation of the Income Tax Act, 2025, which will come into force from April 1, 2026, according to Ravi Agrawal, chairman of the Central Board of Direct Taxes (CBDT).
Speaking during a post-Budget interaction, Agrawal said the tax department plans to issue the new forms and rules within February and place them in the public domain for stakeholder consultations before the new law becomes operational.
"We will be issuing the new income tax forms and rules within February. They will be opened for stakeholder consultation before the new Income Tax Act of 2025 gets implemented from April 1, 2026,” Agrawal said.
FAQs and guidance to ease transition
Anticipating a surge in taxpayer queries during the initial rollout phase, the CBDT is also preparing a comprehensive set of frequently asked questions along with explanatory presentations.
These resources are expected to help both taxpayers and tax officials navigate the transition to the new law, particularly during the first quarter of implementation between April and June 2026.
Part of broader tax simplification drive
Agrawal said the direct tax proposals announced in the Union Budget 2026-27 by Nirmala Sitharaman should be viewed as part of a continuing effort to simplify India’s tax framework.
He noted that the reform process began in July 2024 when the government announced a comprehensive review of the Income Tax Act. The first phase focused on simplifying language and improving readability to reduce multiple interpretations and litigation.
“Last year the focus was simplifying the language and presenting the law in a manner comfortable for taxpayers. We deliberately avoided major process changes at that stage,” Agrawal said.
Structural changes introduced in Budget 2026
The second phase of reforms, introduced through the latest Budget, includes structural changes to tax provisions aimed at improving clarity and easing compliance before the new Act comes into effect.
Among key measures:
- Decriminalisation of certain prosecution provisions
- Immunity from penalties in select cases
- Simplification of compliance procedures
- Reduced litigation burden
According to the CBDT, these steps are intended to strengthen tax administration while lowering compliance costs and improving taxpayer services.
Continuity between old and new tax laws
Agrawal also clarified that certain proceedings initiated after April 1, 2026 may still relate to provisions under the older Income-tax Act, 1961, ensuring continuity during the transition to the new regime.
88% taxpayers shift to new regime
As many as 88 per cent of individual taxpayers have moved to the new tax regime and the government is not thinking of bringing in a sunset clause for filing income tax returns under the old regime, Agrawal said on Wednesday.
He said selecting a particular tax regime is the choice of the taxpayers, but the response to the new regime has been "very good".
Data shared by the CBDT shows strong adoption of the new tax structure introduced in recent years. Around 88% of individual taxpayers filing returns through ITR-1, ITR-2, ITR-3 and ITR-4 have opted for the new tax regime, reflecting a clear preference for simplified tax slabs over deduction-heavy calculations under the old system.
The shift is even more pronounced among small businesses and professionals. Nearly 97% of taxpayers under presumptive taxation schemes have migrated to the new regime, while about 60% of corporate income is now being reported under the revised tax structure, Agrawal said.
Budget changes expected to accelerate migration
Officials believe provisions introduced in the Union Budget 2026-27 could further encourage taxpayers to move to the new regime.
Among the key changes is the modification of Minimum Alternate Tax (MAT) provisions for companies. The Budget has proposed treating MAT as the final tax and reducing its rate to 14% from 15% under the old regime. MAT is currently applicable to companies when their tax liability under normal provisions falls below a specified percentage of book profits.
According to Agrawal, these adjustments are expected to strengthen the attractiveness of the new tax framework.
STT hike aimed at curbing excessive derivatives trading
The Budget has also proposed raising the Securities Transaction Tax (STT) on derivatives trading. STT on futures contracts will increase to 0.05% from 0.02%, while STT on options premium and exercise of options will rise to 0.15%.
Agrawal said the move is intended to discourage aggressive retail speculation in derivatives markets, although its impact will become clear over time.
Strong tax collections remain a focus
The CBDT chief expressed confidence in meeting the revised direct tax collection target of ₹24.21 lakh crore for FY26, reflecting continued growth in taxpayer compliance and economic activity.
Old vs new regime: What taxpayers should know
The old tax regime allows taxpayers to claim multiple deductions and exemptions but involves higher tax rates and complex calculations. The new regime offers lower tax rates with fewer deductions, making compliance simpler for most taxpayers.
 "CBDT to issue new tax rules; 88% taxpayers already in new regime")
