New Delhi: The Central Board of Direct Taxes (CBDT) has officially notified the Income-tax Rules, 2026, set to operationalize the landmark Income-tax Act, 2025, starting April 1, 2026. This new regulatory framework simplifies the six-decade-old tax legislation, reducing the number of sections from 819 to 536. A major highlight for salaried taxpayers is the expansion of the “metro” classification for House Rent Allowance (HRA) exemptions. The rules have doubled the number of cities eligible for the 50% salary exemption limit from four to eight, now including Hyderabad, Pune, Ahmedabad, and Bengaluru alongside Mumbai, Kolkata, Delhi, and Chennai.
While the rules provide enhanced benefits, they also introduce stricter transparency measures. Taxpayers claiming HRA deductions must now mandatorily disclose their landlord-tenant relationship to prevent fraudulent claims. Furthermore, the new rules significantly raise the thresholds for quoting Permanent Account Numbers (PAN) in various high-value transactions. The limit for mandatory PAN disclosure for cash deposits or withdrawals has been increased to ₹10 lakh per financial year, while the threshold for property transactions has been raised from ₹10 lakh to ₹20 lakh. For hotel and restaurant bills, the PAN requirement now kicks in at ₹1 lakh, up from the previous ₹50,000.
The 1,000-page document also modernizes the tax code by integrating digital realities. Crypto exchanges are now required to share information with the tax department, and the Central Bank Digital Currency (CBDC) has been formally recognized as an accepted mode of electronic payment. Additionally, the rules provide a fair valuation framework for electric vehicles (EVs), treating them on par with small-engine cars (below 1.6 litres) for the purpose of calculating employee perquisites when used for both official and personal tasks.
To ensure compliance and reduce tax evasion, the new rules place a heavier burden of responsibility on auditors and corporate entities. Auditors are now tasked with more rigorous checks for PAN duplication and verifying tax credits on foreign income. The legislation aims to replace dense, archaic text with 39 new tables and 40 formulas to enhance clarity for the average taxpayer. While the tax rates themselves remain unchanged, the procedural overhaul is intended to streamline the filing process and strengthen anti-avoidance provisions in cross-border structures.
