CBDT to roll out new I-T forms, rules and FAQs; clarity on what might remain changed from April 1
The government has clarified that income earned in FY 2025–26 will continue to be governed by the existing Income-tax Act, 1961, even though the new law becomes effective from April 1, 2026. This is significant because the assessment of FY 2025–26 income takes place in Assessment Year 2026–27, which coincides with the first year of the new Act.
- Feb 4, 2026,
- Updated Feb 4, 2026 7:12 PM IST
Tax rules 2026: The Central Board of Direct Taxes (CBDT) will shortly notify a fresh set of income tax return forms, rules and detailed FAQs ahead of the rollout of the new Income-tax Act, 2025, from April 1, 2026, CBDT Chairman Ravi Agrawal said on Wednesday. The move is aimed at ensuring a smooth transition to the new tax framework and addressing taxpayer concerns well before the law comes into force.
In a post-Budget interaction, Agrawal said the direct tax proposals announced in the Union Budget 2026–27 should be seen as part of a continuing reform process focused on simplification, certainty and ease of compliance. “We will be issuing the new income tax forms and rules within February. These will also be opened for stakeholder consultation before the new Income-tax Act, 2025 is implemented from April 1, 2026,” he said.
The CBDT is also working on a comprehensive set of FAQs and explanatory presentations on the new law, which will be released during the transition phase. Anticipating a spike in taxpayer queries during the initial rollout period between April and June 2026, Agrawal said these guidance notes will help both taxpayers and income tax officials interpret and apply the new provisions consistently, reducing confusion and litigation at the outset.
Agrawal noted that the reform exercise formally began in July 2024, when Finance Minister Nirmala Sitharaman announced a comprehensive review of the Income-tax Act. The first phase focused on simplifying the language and structure of the law to reduce ambiguity and curb multiple interpretations. “The next step, announced in this Budget, involves making structural changes to provisions before the new Act comes into force,” he said.
Key measures such as decriminalisation of select offences, rationalisation of penalties and expanded immunity provisions are aimed at improving tax administration, reducing compliance costs and providing greater certainty to taxpayers. At the same time, the government has sought to reassure taxpayers on the transition to the new regime.
What remains unchanged from April 1
While the Income-tax Act, 2025 is being positioned as a significant rewrite -- with a reorganised structure, simpler language and the introduction of the “tax year” in place of the earlier “previous year”—amendments to the Income-tax Act, 1961 in the Budget are intended to ensure continuity. CBDT Chairman Ravi Agrawal noted that some proceedings initiated after April 1, 2026 may still relate to earlier assessment years, addressing concerns over which law will apply during the switchover period.
The government has clarified that income earned in FY 2025–26 will continue to be governed by the existing Income-tax Act, 1961, even though the new law becomes effective from April 1, 2026. This is significant because the assessment of FY 2025–26 income takes place in Assessment Year 2026–27, which coincides with the first year of the new Act.
To remove ambiguity, the FAQs explain that the applicable law is determined by when the income is earned, not when it is assessed. Assessment Year 2026–27 under the 1961 Act will relate only to income earned in FY 2025–26, while income earned from April 1, 2026 onwards will fall under the new Income-tax Act, 2025.
Under the new framework, the tax year 2026–27 will apply exclusively to income earned during FY 2026–27. This ensures there is no overlap or conflict between the two statutes, even though assessments for different income periods may occur in the same calendar year.
A key conceptual change in the new Act is the introduction of the “tax year”, defined as a 12-month period within a financial year. The government said the earlier use of both “previous year” and “assessment year” often caused confusion, as they referred to different financial years. The tax year is intended to create a clearer, more intuitive link between income, tax rates and assessment.
At the same time, the term “financial year” has been retained, as several procedural timelines—such as return filing deadlines, rectification windows and compliance actions—continue to be anchored to it. The FAQs also clarify that a tax year may be shorter than 12 months in specific situations, such as when a new business is set up or a new source of income begins during the year.
Overall, the government has emphasised that the transition to the new law will be orderly and taxpayer-friendly. There will be no double taxation, no change in tax liability for income earned up to March 31, 2026, and no abrupt shift in compliance timelines. The reform, officials stressed, is aimed at simplifying the law and improving clarity—without disrupting the existing assessment framework overnight.
(With PTI inputs)
Track live Budget updates, breaking news, expert opinions and in-depth analysis only on BusinessToday.in
Tax rules 2026: The Central Board of Direct Taxes (CBDT) will shortly notify a fresh set of income tax return forms, rules and detailed FAQs ahead of the rollout of the new Income-tax Act, 2025, from April 1, 2026, CBDT Chairman Ravi Agrawal said on Wednesday. The move is aimed at ensuring a smooth transition to the new tax framework and addressing taxpayer concerns well before the law comes into force.
In a post-Budget interaction, Agrawal said the direct tax proposals announced in the Union Budget 2026–27 should be seen as part of a continuing reform process focused on simplification, certainty and ease of compliance. “We will be issuing the new income tax forms and rules within February. These will also be opened for stakeholder consultation before the new Income-tax Act, 2025 is implemented from April 1, 2026,” he said.
The CBDT is also working on a comprehensive set of FAQs and explanatory presentations on the new law, which will be released during the transition phase. Anticipating a spike in taxpayer queries during the initial rollout period between April and June 2026, Agrawal said these guidance notes will help both taxpayers and income tax officials interpret and apply the new provisions consistently, reducing confusion and litigation at the outset.
Agrawal noted that the reform exercise formally began in July 2024, when Finance Minister Nirmala Sitharaman announced a comprehensive review of the Income-tax Act. The first phase focused on simplifying the language and structure of the law to reduce ambiguity and curb multiple interpretations. “The next step, announced in this Budget, involves making structural changes to provisions before the new Act comes into force,” he said.
Key measures such as decriminalisation of select offences, rationalisation of penalties and expanded immunity provisions are aimed at improving tax administration, reducing compliance costs and providing greater certainty to taxpayers. At the same time, the government has sought to reassure taxpayers on the transition to the new regime.
What remains unchanged from April 1
While the Income-tax Act, 2025 is being positioned as a significant rewrite -- with a reorganised structure, simpler language and the introduction of the “tax year” in place of the earlier “previous year”—amendments to the Income-tax Act, 1961 in the Budget are intended to ensure continuity. CBDT Chairman Ravi Agrawal noted that some proceedings initiated after April 1, 2026 may still relate to earlier assessment years, addressing concerns over which law will apply during the switchover period.
The government has clarified that income earned in FY 2025–26 will continue to be governed by the existing Income-tax Act, 1961, even though the new law becomes effective from April 1, 2026. This is significant because the assessment of FY 2025–26 income takes place in Assessment Year 2026–27, which coincides with the first year of the new Act.
To remove ambiguity, the FAQs explain that the applicable law is determined by when the income is earned, not when it is assessed. Assessment Year 2026–27 under the 1961 Act will relate only to income earned in FY 2025–26, while income earned from April 1, 2026 onwards will fall under the new Income-tax Act, 2025.
Under the new framework, the tax year 2026–27 will apply exclusively to income earned during FY 2026–27. This ensures there is no overlap or conflict between the two statutes, even though assessments for different income periods may occur in the same calendar year.
A key conceptual change in the new Act is the introduction of the “tax year”, defined as a 12-month period within a financial year. The government said the earlier use of both “previous year” and “assessment year” often caused confusion, as they referred to different financial years. The tax year is intended to create a clearer, more intuitive link between income, tax rates and assessment.
At the same time, the term “financial year” has been retained, as several procedural timelines—such as return filing deadlines, rectification windows and compliance actions—continue to be anchored to it. The FAQs also clarify that a tax year may be shorter than 12 months in specific situations, such as when a new business is set up or a new source of income begins during the year.
Overall, the government has emphasised that the transition to the new law will be orderly and taxpayer-friendly. There will be no double taxation, no change in tax liability for income earned up to March 31, 2026, and no abrupt shift in compliance timelines. The reform, officials stressed, is aimed at simplifying the law and improving clarity—without disrupting the existing assessment framework overnight.
(With PTI inputs)
Track live Budget updates, breaking news, expert opinions and in-depth analysis only on BusinessToday.in