Income tax rules are the detailed procedures and forms that sit under the Act: they fix how perquisites are valued, which ITR form to use, how TDS is deposited and reported, and many limits the Act leaves to the CBDT. Income of FY 2025-26 is handled under the Income-tax Rules, 1962, while the new Income-tax Rules, 2026 apply from 1 April 2026 for tax year 2026-27.
The CBDT made the new rules using its power in section 533 of the Income-tax Act, 2025 and notified them in March, after a draft was released for public comment. They renumber most forms and raise several old allowance limits. This guide covers both sets.
Quick facts
Old rules
Income-tax Rules, 1962, for FY 2025-26 and earlierNew rules
Income-tax Rules, 2026, from 1 April 2026Power to make rules
Section 295 of the 1961 Act; section 533 of the 2025 ActMade by
CBDT, by notificationSalary certificate
Form 16 becomes Form 130Nil TDS declaration
Forms 15G and 15H become Form 121Employee proof form
Form 12BB becomes Form 124
Income tax rules 1962 and Income Tax Rules 2026 side by side
| Point | Income-tax Rules, 1962 | Income-tax Rules, 2026 |
|---|---|---|
| Made under | Section 295, 1961 Act | Section 533, 2025 Act |
| Applies to | FY 2025-26 and earlier years | Tax year 2026-27 onward |
| Certificate of TDS on salary | Form 16 | Form 130 |
| Nil deduction request by depositors | Forms 15G and 15H | Form 121 |
| Employee claims to employer | Form 12BB | Form 124 |
| Year label in forms | Two labels, PY and AY | One label, the tax year |
Proceedings for old years, such as a scrutiny of AY 2025-26, still use the Income-tax Rules, 1962 and their forms.
Older rules that people still look up
| Rule | What it covers |
|---|---|
| Rule 2BB | Allowances exempt for salaried staff, such as children's education and hostel allowance, in the old regime |
| Rule 3 | Valuation of perquisites, such as a company car, rent-free house or interest-free loan |
| Rule 6DD | Cases where a cash payment above ₹10,000 a day is still allowed as a business expense |
| Rule 11UA | Fair market value of shares and other property, used for gifts and share issues |
| Rule 12 | Which ITR form applies to whom, and how returns are filed |
| Rule 30 and rule 31A | When TDS is deposited and how quarterly TDS statements are filed |
| Rule 46A | When new evidence can be produced before the CIT(A) |
| Rule 114 and 114B | PAN application and the transactions that need a PAN |
| Rule 115 | Exchange rate used to convert foreign income into rupees |
New income tax rules 2026 for salaried employees
Several limits in the old rules had not moved in decades. The new rules raise them for tax year 2026-27.
| Item | FY 2025-26 (old rules) | Tax year 2026-27 (new rules) |
|---|---|---|
| Children's education allowance, per child per month, up to two children | ₹100 | ₹3,000 |
| Hostel allowance, per child per month, up to two children | ₹300 | ₹9,000 |
| Gifts and vouchers from the employer, a year | ₹5,000 | ₹15,000 |
The education and hostel allowances help only those who choose the old regime, since the new regime does not allow these exemptions.
Example. Deepak, on the old regime, has two children in a hostel. His employer pays ₹3,000 education allowance and ₹9,000 hostel allowance per child per month. Under the old rules the yearly exemption would be (₹100 + ₹300) × 2 × 12 = ₹9,600. Under the new rules it is (₹3,000 + ₹9,000) × 2 × 12 = ₹2,88,000. At a 30% slab plus cess, the extra ₹2,78,400 of exemption saves about ₹86,861 of tax.
TDS rules 2026: what changes for deductors
Once a payment is credited or paid from 1 April 2026 onward, section 393 of the new Act governs the deduction, and statements, challans and certificates follow the Income-tax Rules, 2026 and their new form numbers. Payments for FY 2025-26 stay under the old forms, including Form 16 and Form 16A for that year.
- Update accounting software to the new section codes before the first challan of tax year 2026-27.
- Collect Form 121 from depositors and pensioners in place of Form 15G or 15H.
- Ask employees for Form 124 in place of Form 12BB, and issue Form 130 for their salary TDS.
- Keep using the old forms for any correction to FY 2025-26 statements.
Rates, which largely carried over, are listed in the TDS rate chart.
Where to read the income tax rules 2026 pdf
- Open the department's law website, incometaxindia.gov.in.
- Go to the Rules part of the tax laws section.
- Choose the Income-tax Rules, 2026 for tax year 2026-27, or the Income-tax Rules, 1962 for earlier years.
- Open the rule by number, or download the full text and form list as a PDF.
- Forms are submitted online through the e-filing portal and use the e-File menu.
Mistakes with the rules during the change-over
| Mix-up | Fix |
|---|---|
| Applying the ₹3,000 education allowance to FY 2025-26 salary | The higher limit starts in tax year 2026-27 |
| Using a draft rule as final | Rely on the notified Income-tax Rules, 2026 |
| Filing Form 15G for interest due after 1 April 2026 | Use Form 121 |
| Quoting an old rule number in a new form | Rule numbers changed; check the new set |
This page outlines the tax rules for general understanding. Notifications and corrections are issued from time to time, so read the notified text on the official website or check with a chartered accountant.
Sources we checked
- Income-tax Rules, 1962
- Income-tax Rules, 2026
- Income-tax Act, 2025, section 533
Frequently asked questions
What are the new income tax rules from 1 April 2026?
The Income-tax Rules, 2026 apply from 1 April 2026 under the 2025 Act. They renumber forms, such as Form 130 for salary TDS certificates, and raise several allowance limits.
Do the Income-tax Rules, 1962 still apply?
Yes, for income of FY 2025-26 and earlier years and for proceedings about those years.
What is rule 6DD of the income tax rules?
It lists cases where a cash payment of more than ₹10,000 in a day is still allowed as a business expense, such as payments to banks or to farmers for produce.
What is rule 11UA?
It sets the method for fair market value of shares and other property, used for gift tax on shares and for share issue pricing.
Were the draft income tax rules 2026 changed before notification?
Draft rules were released for comment first. Always use the notified version on the official website, not a draft copy.