The notification completes the legal framework for the implementation of the Income-tax Act, 2025, replacing the decades-old Income-tax Rules, 1962. While the rules do not alter the tax base, they signal a decisive shift towards greater transparency, digital reporting, and structured compliance.
According to Sandeep Bhalla, Partner at Dhruva Advisors, the 976-page rulebook largely follows the draft proposals and focuses on improving tax administration rather than introducing new levies.
What changes for salaried individuals
Amit Maheshwari, Managing Partner at AKM Global, highlights two major changes that will directly affect individual taxpayers:
EVs get tax clarity, become more attractive as perks
The government has formally included electric vehicles (EVs) in concessional perquisite valuation rules.
- ₹5,000 per month (plus ₹3,000 for chauffeur), where employer bears costs
- ₹2,000 per month (plus ₹3,000 chauffeur), where employee bears personal-use expenses
Earlier, perquisite valuation was linked to engine capacity — irrelevant for EVs — creating ambiguity.
This change removes uncertainty for employers and payroll teams, making EVs a more tax-efficient component of compensation packages. It is also expected to support corporate-led EV adoption in line with India’s clean mobility goals.
HRA relief expanded, but NCR cities miss out
Under the new rules, the 50% HRA exemption category has been expanded to include:
- Bengaluru, Hyderabad, Pune, Ahmedabad
These join the existing metro cities:
- Mumbai, Delhi, Chennai, Kolkata
However, Noida, Gurugram, and Navi Mumbai continue to remain under the 40% HRA bracket.
This creates a tax disparity for salaried employees in NCR satellite cities, where housing costs are comparable to metros but tax benefits remain lower. The move indicates a selective expansion of metro classification, leaving out key high-rent urban clusters.
Compliance push: No new taxes, but wider reporting net
Beyond individual taxpayers, the rules focus heavily on strengthening compliance through technology and disclosures.
Key measures include:
- Expanded digital reporting requirements
- Greater reliance on data-driven tax scrutiny
- Enhanced documentation and audit trails
Businesses and high-income taxpayers will need to upgrade compliance systems and ensure tighter documentation, as tax authorities move towards automated and analytics-led enforcement.
Crypto, CBDCs brought into reporting framework
In line with global standards led by the OECD, India has expanded its tax transparency regime to include emerging digital assets.
Key changes:
- Crypto-assets, central bank digital currencies (CBDCs), and e-money products now classified as reportable accounts
- Certain low-risk accounts excluded to reduce compliance burden
- Enhanced reporting requirements, including ownership and account classification details
Alignment with AML/KYC frameworks
This significantly increases visibility over cross-border digital transactions, placing additional compliance responsibilities on financial institutions while tightening oversight of crypto investors.
Transfer pricing rules tweaked for corporates
The rules also refine safe harbour provisions relevant for multinational companies and IT/ITES firms.
Key changes:
- Expanded definition of data centre services
- Safe harbour application to be filed before ITR deadline
- ₹2,000 crore threshold to be tested in the first year
- Exit option within 6 months from end of Year 1
The changes could reduce litigation risk for eligible taxpayers by widening safe harbour coverage, but will require early planning and stricter adherence to timelines.
Charitable trusts: Simpler processes, tighter checks
Procedural reforms have also been introduced for charitable organisations.
Key changes:
- Single application form for registration and approvals
- Centralised processing through CPC
- Option to surrender provisional registration
- Record-keeping has been reduced to 6 years from 10 years
While compliance becomes simpler and more streamlined, increased centralisation and checks are likely to curb misuse and improve oversight in the non-profit sector.
A digital-first tax regime takes shape
Overall, the Income-tax Rules, 2026, represent a structural shift in how India administers taxes — without significantly altering how much tax is paid.
From EV-friendly perks to expanded HRA benefits and tighter reporting on digital assets, the new framework underscores a clear direction — simplify where possible, but scrutinise more deeply through data and technology.
As Bhalla notes, the rules lay the groundwork for a more transparent, efficient, and globally aligned tax system as India transitions into its new income-tax regime from April 2026.