Draft Income Tax Rules, 2026:The proposedDraft Income Tax Rules, 2026may quietly change the old vs new tax regime debate. While the Income Tax Act, 2025 introduced a major structural reset and simplified tax language, for most taxpayers the real question is simple: Will I save more tax?
The new Act and Rules will take effect from April 1, 2026 (tax year 2026–27). The Rules are currently in draft form, with public feedback open until February 22.
On the surface, the reforms look streamlined. The number of rules has been reduced from 511 to 333, and forms from 399 to 190. But beyond simplification, the proposed allowance upgrades could make the old tax regime more attractive for some salaried individuals.
Also Read -Draft Income Tax Rules 2026: Big Relief for Middle Class - How You Could Save Rs 1.41 Lakh Under Old Regime
Over 80% of individual taxpayers have shifted to the new regime in recent years due to lower tax rates and fewer deductions.
However, under the old regime, taxpayers can claim exemptions and deductions. The challenge has always been reaching the breakeven point.
Earlier, reaching such deduction levels seemed difficult. The draft Rules may now change that calculation.
Two long-frozen allowances are being revised sharply:
For a salaried employee with two children in hostels, the hostel exemption alone can rise to Rs 2.16 lakh annually (earlier just Rs 7,200). Add education allowance of Rs 72,000, and the total increases meaningfully.
A major change relates to House Rent Allowance (HRA).
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