Learn about tax rule changes to avoid last-minute confusion during filing

In the tax return forms, more data will come pre-filled, but it should be verified against your own records to avoid mismatches

While undertaking a comprehensive review of the Income-Tax (I-T) Act, the central government realised that taxpayers do not experience the Act directly. Their daily interaction with the tax system occurs through rules, forms, and filing processes. Revising the law without changing the rules and forms would not deliver the desired ease of compliance. Hence, it has undertaken a comprehensive revision of the rules and forms as well.

 

The draft I-T Rules, 2026 are more aligned with the I-T Act, 2025, which is slated to come into force from April 1, 2026. The draft rules and redesigned income tax return (ITR) forms are in the public domain for stakeholder feedback until February 22, 2026, ahead of final notification.

 

The broad objective is to simplify tax rules, eliminate redundant provisions, and consolidate existing ones. “These new rules also aim to simplify compliances, reduce regulatory complexity, leverage technology, and cut paperwork,” says Ashish Mehta, partner, Khaitan & Co.

 

Smoother compliance

 

The draft seeks to make compliance smoother through standardisation of common information across forms, with the aim of reducing duplication and overall compliance burden. The redesigned forms are more structured, with automated reconciliation and enhanced pre-fill features that aim to reduce errors and the need for manual inputs.

 

Taxpayers may need to adjust to new references, because familiar references to old provisions, rules, and forms will change under the new framework.

 

Number of rules and forms reduced

 

The draft framework signals a significant rationalisation of the compliance architecture. “The number of rules has been reduced from 511 to 333, while the number of forms has been reduced from 399 to 190,” says Neeraj Agarwala, partner, Nangia & Co.

 

Redundant rules have been removed or consolidated wherever possible, with the intent of making them easier to interpret and apply.

 

Forms redesigned and restructured

 

ITR forms have been redesigned. Common information across forms has been standardised to reduce duplication and compliance burden. “The forms use simplified language and clearer explanatory notes to minimise operational, administrative, and legal ambiguities,” says Agarwala.

 

The redesigned forms are smarter and more structured. “They offer features like automated reconciliation and enhanced pre-fill capabilities, which are expected to reduce the chances of errors and the need for manual inputs,” says Vipin Upadhyay, partner, King Stubb & Kasiva, Advocates and Attorneys.

 

Mehta adds that with fewer forms, more automation, and more pre-filling of data, customers are likely to find it easier to file their returns. He highlights that forms used by senior citizens, such as those relating to pension and exemption claims, have been simplified.

 

How non-PAN declarations are changing

 

If a person enters into a specified transaction that requires PAN but he does not possess it, the person can make a non-PAN declaration. The scope of transactions requiring the declaration has been consolidated, and monetary thresholds have been revised. “This will reduce the need to repetitively furnish declarations for small or incidental transactions,” says Suresh Surana, a Mumbai-based chartered accountant. He adds that these changes are expected to minimise procedural hassles for individuals who are otherwise not required to obtain a PAN.

 

PAN application process changing

 

The PAN application framework is being rationalised. The PAN application forms have been split between individuals and non-individuals. “The proposed changes are aimed at simplifying the PAN application process by increasing reliance on electronic submission and electronic verification mechanisms,” says Surana.

 

What Forms 15G and 15H merger means for TDS

 

Forms 15G and 15H serve a similar purpose of allowing taxpayers to make a self-declaration for non-deduction of TDS. The only difference lies in the age groups they cater to. The two forms are now being merged to reduce duplication and prevent mistakes.

 

A single unified self-declaration form, Form No. 121, will be introduced. “It will have fields that will capture whether the declarant is a senior citizen and will then apply the relevant eligibility conditions,” says Surana. The merger is expected to minimise instances of excess or erroneous TDS being deducted and improve ease of compliance.

 

What changes for specified senior citizens aged 75 years and above

 

Form 12BBA allows specified senior citizens aged 75 years or above with only pension and interest income from a specified bank to avoid filing a return. They can authorise their bank to compute income and deduct tax. Draft Form No. 125 will replace Form 12BBA.

 

This form will have additional well-structured fields for email ID and contact number and clearer specification of accounts maintained with the bank. It will also include an explicit option to indicate whether the taxpayer is opting for the new tax regime. “The change is intended to provide greater clarity and ease to specified senior citizens. It is also expected to make the exemption mechanism more convenient and accurate,” says Surana.

 

Tax-free limits for certain employer perks may change

 

The tax-free limits of perks like free food, gifts in kind, and interest-free loans are being increased. The value of the car perk, in particular, is being increased significantly. This is expected to provide relief by reducing taxable salary.

 

“Employees are advised to evaluate the impact on taxable salary and explore restructuring options with employers,” says Rupali Singhania, founder, Areete Consultants.

 

HRA ‘metro city’ list expanding

 

The scope of house rent allowance (HRA) relief is being widened with Bengaluru, Hyderabad, Pune, and Ahmedabad being brought at par with metro cities for the purpose of HRA exemption. “This will enable employees in these cities to benefit from higher HRA exemption on rent,” says Singhania.

 

The exemption on basic salary will increase from 40 per cent to 50 per cent. “Employees should evaluate taxes under both regimes because HRA exemption is not available in the new tax regime,” says Singhania.

 

Implications of higher PAN thresholds for cash transactions

 

Revised PAN reporting limits will require PAN disclosure only when specified transactions cross higher thresholds. PAN will be mandatory for cash deposits or withdrawals aggregating to ~10 lakh or more in a financial year. This is expected to reduce the procedural compliance for day-to-day transactions.

 

While the higher transaction threshold for quoting PAN is intended to simplify compliance, there is a possibility of misuse. “The higher limits should not be exploited for tax evasion due to the severe penalty and prosecution risks,” says Singhania. Taxpayers should also keep track of cash transactions to ensure compliance.

 

Dos and don’ts

 

While the language, rules, and forms are being simplified and modified, the law is not being overhauled, and its basic premises remain the same. Nonetheless, some learning will be required. “The compliance process may not remain exactly the same due to consolidation, renumbering, and introduction of new forms,” says Agarwala.

 

Mehta suggests that taxpayers should familiarise themselves with relevant changes early to avoid last-minute rush, deadline pressures, and confusion. One precaution all taxpayers must exercise is not to blindly accept auto-populated values from sources like Form 26AS or AIS. “They should carefully verify all pre-filled data against their own records such as salary slips, Form 16, bank statements, and investment proofs to avoid mismatches or duplication,” says Mehta.

 

Finally, taxpayers need not panic about the scale of changes. Experts are of the view that for individual taxpayers, the changes in regular filing requirements and experience are likely to be minimal.

 

What experts suggest

 

Experts broadly see the draft tax rules and forms as positive, but they have a few suggestions:

The 15-day public review window, ending February 22, 2026, is relatively short

A longer consultation period should have been provided

The tax department should issue more instructions to support a smooth transition to the new rules and forms

The tax department should issue detailed FAQs to reduce early-stage confusion and misunderstandings

It should develop dynamic inline error messaging to reduce early-stage confusion and misunderstandings