CBDT releases Draft of Income Tax Rule, 2026: Complete Details Inside

The Draft Income-tax Rules, 2026, released February 7, 2026, by the Central Board of Direct Taxes (CBDT), mark a major step in India's tax framework under the Income Tax Act,2025, also designed to take effect from April 1, 2026.

They provide clarity on critical areas such as dividend distribution, recognition of stock exchanges, treatment of capital assets, issuance of zero-coupon bonds, and residency rules for seafarers and non-residents.

The draft also introduces updated provisions for fair market valuation, significant economic presence in the digital economy, and taxation of employee benefits and medical facilities. By laying down structured procedures and definitions, the rules seek to balance the interests of companies, employees, investors, and foreign entities, while ensuring consistency with global standards.

The Draft Income-tax Rules and Forms, 2026 mark a major overhaul of India’s tax compliance framework, reducing the number of rules from 511 to 333 and forms from 399 to 190.

The main goal is to tighten compliance and make taxation clearer for companies, stock exchanges, foreign businesses, and individuals.

Some of the rules:

Companies: Must keep shareholder records, hold meetings, and pay dividends only within India.

Stock Exchanges: Need SEBI approval, maintain detailed client records, keep a 7-year audit trail, and report monthly to the tax department.

Zero-Coupon Bonds: Infrastructure and public sector firms can issue them under strict conditions (credit ratings, listing, investment timelines).

Valuation Methods: Detailed formulas for the fair market value of shares and assets, especially when foreign companies hold Indian assets.

Foreign Businesses: Considered to have a “significant presence” if they cross transaction or user thresholds.

Employee Perks: Benefits like housing, cars, education, and gifts will be taxed as part of salary.

Hospitals: Must meet strict standards to qualify for tax-exempt medical benefits.

In short, the draft rules are about :

● How companies and exchanges must operate for tax compliance.

● How to calculate holding periods and asset values for capital gains.

● When foreign companies or individuals are taxed in India.

● How employee perks and benefits are valued for taxation.

● Standards for hospitals to qualify for tax exemptions on medical benefits.