Last Updated:
The Draft Income Tax Rules, 2026, propose to remove the requirement of filing a separate form to claim concessional tax rates under the new tax regime.
Income Tax Draft Rules 2026: Eligible taxpayers will be able to exercise or withdraw the option directly in their return of income filed under Section 263(1) of the new Income Tax Act, 2025.
Income Tax Draft Rules 2026: In a move to simplify tax filing, the income tax department has proposed draft rules to allow taxpayers to choose between the old and new income tax systems directly in their return form, instead of filing a separate declaration.
Currently, certain taxpayers — particularly individuals, Hindu Undivided Families (HUFs) and others having business or professional income — are required to file Form 10-IEA electronically under Rule 21AG of the Income-tax Rules, 1962, to opt for the old tax regime. This form must be submitted on or before the due date of filing the return.
Taxpayers without business income, however, can choose the old regime directly while filing their income tax return and are not required to submit a separate form.
What Changes Under Draft Rules 2026
The Draft Income Tax Rules, 2026, propose to remove the requirement of filing a separate form to claim concessional tax rates under the new tax regime.
Instead, eligible taxpayers will be able to exercise or withdraw the option directly in their return of income filed under Section 263(1) of the new Income Tax Act, 2025.
This means the choice between tax regimes — old or concessional — will be consolidated into the income tax return itself, reducing additional compliance steps.
Who Will Be Covered
Under the draft framework, the option to opt in or withdraw from concessional tax regimes must be exercised in the return of income by the following categories:
- Manufacturing domestic companies (Section 115BA equivalent under draft Rule 199(3))
- Domestic companies (Section 115BAA under draft Rule 200(5))
- New manufacturing domestic companies (Section 115BAB under draft Rule 201(2))
- Individuals, HUFs, AOPs (other than co-operative societies), BOIs and artificial juridical persons (Section 115BAC under draft Rule 202(4))
- Resident co-operative societies (Section 115BAD under draft Rule 203(5))
- New manufacturing co-operative societies (Section 115BAE under draft Rule 204(2))
For each tax year, the option must be selected or withdrawn within the return filed for that year.
Why This Matters
The proposed change removes duplication in compliance and aligns the tax regime selection process with return filing. Currently, taxpayers with business income face additional procedural requirements compared to salaried individuals without business income.
If notified in the current form, the amendment is expected to reduce procedural complexity and bring uniformity across taxpayer categories under the new Income Tax Act, 2025.
The draft rules are expected to be finalised, and will come into effect alongside the new Income Tax Act, 2025.
Click here to add News18 as your preferred news source on Google.
Follow News18 on Google. Join the fun, play games on News18. Stay updated with all the latest business news, including market trends, stock updates, tax, IPO, banking finance, real estate, savings and investments. To Get in-depth analysis, expert opinions, and real-time updates. Also Download the News18 App to stay updated.
February 25, 2026, 14:05 IST
Read More
