CBDT Notifies 2026 Income Tax Rules Introducing 'Tax Year' System, Streamlines Compliance Framework
Manu Sharma
20 March 2026 5:07 PM IST
Today, the Central Board of Direct Taxes (CBDT) notified the Income Tax Rules, 2026, which will come into force from 1 April 2026. The draft rules were published on 9 February 2026 for public consultation, inviting suggestions and feedback.
The rules establish the procedural framework for implementing the Income Tax Act, 2025, which repeals the Income-tax Act, 1961.
The repeal of the 1961 Act does not affect matters relating to tax years prior to 1 April 2026. For instance, if a taxpayer's assessment for the assessment year 2023–24 was completed under the old Act, that assessment will remain valid even after the new Act comes into force. Similarly, any pending proceedings for earlier years will continue under the transitional provisions provided by the new law.
Notably, under the 1961 Act, income-tax was charged on the 'total income' of the 'previous year' of a person. Tax was levied for an 'assessment year' at the rate or rates provided by any Central Act, in accordance with, and subject to, the provisions of the Act. In contrast, the Income Tax Act, 2025, replaces the term 'previous year' with 'tax year' and discontinues the use of 'assessment year'.
Under the new Act, income-tax is charged on the 'total income' of the 'tax year' of a person at the rates specified for that tax year by any Central Act, in accordance with, and subject to, the provisions of the Income-tax Act, 2025.
The notification also clarifies that the rules are framed in exercise of powers conferred under the Act and will apply prospectively from the commencement date, ensuring a clear and orderly transition from the old regime to the new framework.