The government has notified the Income Tax Rules, 2026. These rules will come into effect from April 1 and will decide how the new Income Tax Act, 2025 will work at the ground level. These rules are not limited to just broad provisions, but also specify the exact formulas, limits and reporting requirements that taxpayers, companies and tax authorities will have to follow. On a larger level, this is part of the government’s effort to replace the old Income Tax Act, 1961 with a simpler and modern law that reflects today’s digital economy.
Its objective is simple – to ensure uniform accounting, more rigorous tracking of data and to reduce gray areas. These rules also show a shift towards technology-based tax compliance, where a record (trail) of transactions is left and tax imposition is now mostly based on formulas and not on one’s own thinking. Let us also tell you which are the 10 tax related changes that are going to happen, which can completely change your budget…
Digital businesses can now be taxed even if they are not present in India
One of the biggest changes is aimed at digital companies around the world. According to the rules, if the payment received by such a person (non-resident) from users in India exceeds Rs 2 crore, or if that platform has 3 lakh users in India, then it can be taxed in India. This means that companies that provide online services, apps or digital products can now come under the Indian tax net even if they do not have any office in India.
If the income is not clear then the tax officer will get more powers.
In cases where the income of a person (non-resident) cannot be clearly determined, the rules allow the officer to calculate the income in different ways — including using a fixed percentage of turnover or “any other method that the assessing officer deems appropriate.” While this helps tax officials deal with difficult cases, it also increases their discretion, which can lead to more disputes.
Keeping an eye on stock market transactions
Stock exchanges will now have to maintain complete audit records of share trades and maintain transaction data for seven years. They will also have to be informed about any changes regularly. The aim of this move is to increase transparency and ensure that any suspicious transactions can be easily detected.
Clear formula for imposing tax on foreign deals related to India
The rules prescribe a fixed formula to calculate income from foreign share transfers, the value of which is linked to assets located in India. This is important because earlier there were often disputes over such deals. It is expected that this formula-based approach will reduce the ambiguity related to tax imposition between different countries.
The rules for valuation of shares will be more systematic
- The new rules clearly explain how the fair market value (FMV) should be calculated:
- Valuation of listed shares will be done on the basis of market prices
- Unlisted shares will require valuation by experts such as merchant bankers
- This will bring uniformity, but compliance requirements for companies will also increase.
Impact on take-home salary
- Taxation on employee benefits has been explained. For example:
- The evaluation of house rent will now depend on the population of the city.
- Free meal will be tax free only up to Rs 200 per meal.
- Gifts above ₹15,000 will be taxable.
- These changes may bring some changes in the salary structure and the method of tax imposed on it.
People meeting employers will now be less tax friendly
If an employee takes a concessional or interest-free loan from the employer, now this benefit will be calculated on the basis of the loan rate of State Bank of India. This will increase the possibility of tax on such loans as compared to before.
ESOP taxation rules become more clear
- For employees who receive stock options, the rules define how the value of the stock must be determined:
- Market value for listed companies
- Valuation by Merchant Banker for Unlisted Companies
- This eliminates confusion, especially for startup employees.
Simple but strict rules for disallowance of expenses
- Expenses related to tax free income will now include:
- direct expenses
- Also 1 percent of the average investment value
- Although this rule is easy to implement, in some cases it may increase the amount of rejections.
Strict conditions for zero coupon bonds
The rules further tighten the norms for issuing zero coupon bonds. These bonds should have the following characteristics:
- Maturity period should be 10 to 20 years
- Must have investment-grade rating
- The timelines prescribed for utilization of funds should be strictly adhered to
- This leads to better regulation of long-term infra funding instruments.