The new Income Tax Law is set to come into effect starting the financial year 2026-27. The government plans to issue all the rules for this law in one consolidated notification by December 31, 2025.
A senior official told Moneycontrol that the new tax framework will include about 400 rules and 180 forms, which is fewer than the more than 500 rules under the old law.
The main goal of the new Income Tax Law is to simplify tax compliance and improve administration.
“By December 31, we will notify all the rules in a consolidated notification. Budget work will also begin at the same time.
There will be significant system work — testing the rules, conducting trial runs, and collaborative efforts in the fourth quarter,” the official said.
The Income Tax Bill, 2025 became law in August
The Income Tax Bill, 2025 was passed by both houses of Parliament and received President Draupadi Murmu’s approval in August 2025, officially becoming law.
This new law simplifies tax rules and reduces their length, making them easier to understand.
It does not introduce any new income tax rates but removes unnecessary clauses and outdated language.
The old Income Tax Act of 1961 had 819 sections, but the new Act has cut this down to 536 sections.
Similarly, chapters are reduced from 47 to 23, and the total word count has dropped from 512,000 to 260,000.
What are rules and forms in tax administration?
Rules explain how key parts of the tax law will be carried out — for example, how to calculate taxes, process refunds, or apply exemptions.
Forms are the official templates used by taxpayers and businesses to submit details, file returns, or claim benefits. Together, rules and forms are essential for implementing any tax system.
System preparation to continue until January-March 2026
Once the rules are issued, the IT system will be prepared for the new law. Backend development will continue through the January to March 2026 quarter.
The official said forms are being compiled and merged, with prototypes being developed and tested before they go live. “After notification, utilities will be created before enabling forms.
Each form requires detailed development, testing, and integration with data. This work will speed up in the March quarter,” he added. System integration will happen alongside budget preparations.
