The Central Board of Direct Taxes (CBDT) on Friday notified the rules for the Income Tax Act, 2025. These rules provide for enhanced tax benefits on House Rent Allowance (HRA) for salaried individuals, but they also make it mandatory to disclose landlord-tenant relationships.

The Income Tax Rules, 2026, will implement the simplified direct tax law that was approved by Parliament last year. These rules will come into effect on April 1. The notification published in the Gazette states: "These rules may be called the Income Tax Rules, 2026. They shall come into force on April 1, 2026." On August 12, 2025, Parliament passed a new Income Tax Bill to replace the six-decade-old Income Tax Act, 1961. This legislation does not introduce any new tax rates; rather, it merely simplifies the language of the law.

What has been removed?
Such measures were deemed necessary to make complex income tax laws easier to understand. The Act has eliminated unnecessary provisions and archaic language, reducing the number of sections in the Income Tax Act, 1961, from 819 to 536, and cutting the number of chapters from 47 to 23.

In the new Income Tax Bill, the total word count has been reduced from 512,000 to 260,000. Furthermore, to enhance clarity, 39 new tables and 40 new formulas have been introduced—for the first time—to replace the cumbersome text of the 1961 legislation.

What benefits will be available?
The new rules establish stricter regulations regarding capital gains, stock market transactions, and the taxation of non-residents, while simultaneously simplifying other disclosure mechanisms. The notification introduces over 150 official forms.

In Simple Terms: New Income Tax Rules: Several tax-related regulations set to change starting April 1—a move that will have a direct impact on your finances.

What benefits will tenants receive?
The Income Tax Rules retain the proposed framework regarding the House Rent Allowance (HRA) exemption applicable to salaried taxpayers. Under the new rules, eight cities—Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, and Bengaluru—will be eligible for a higher exemption limit of 50 percent of their salary, while all other locations will remain at 40 percent. Currently, salaried employees in Mumbai, Delhi, Kolkata, and Chennai can claim an HRA exemption of up to 50 percent of their salary, whereas those residing in other locations are eligible for a lower limit of 40 percent.

Under the new regulations, it is mandatory to provide details regarding the tenant-landlord relationship to claim income tax deductions; furthermore, the responsibility of auditors and companies regarding claims for tax credits on foreign income has been enhanced. Auditors have been entrusted with greater responsibility to scrutinize tax liabilities arising from the duplication of PANs and from adverse audit observations.

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