What Happened
- The Central Board of Direct Taxes (CBDT) released draft Income Tax Rules and Forms under the new Income Tax Act, 2025, seeking public feedback until February 22, 2026.
- The draft framework reduces the total number of rules from 511 to 333 and nearly halves the number of official tax forms from 399 to 190.
- Two navigators have been provided mapping old rules and forms to the new draft rules and forms to ease the transition for taxpayers and professionals.
- Public feedback is invited across four categories: language simplification, litigation reduction, identification of obsolete rules, and compliance burden reduction.
- The new rules are proposed to take effect from April 1, 2026, when the Income Tax Act 2025 replaces the Income Tax Act 1961.
Static Topic Bridges
Income Tax Act 2025: Replacing the 1961 Framework
The Income Tax Act 1961 governed India's direct taxation for over six decades but grew increasingly complex through 118 amendments by 2017. The new Income Tax Act 2025, passed by Parliament in August 2025 and receiving Presidential assent on August 21, 2025, reduces sections from 819 to 536 and chapters from 47 to 23. It replaces the old "Assessment Year" and "Previous Year" distinction with a unified "Tax Year" concept.
- The Income Tax Act 1961 had accumulated 819 sections across 47 chapters, making it one of the most complex tax statutes globally.
- Multiple reform attempts preceded this: the Raja Chelliah Tax Reforms Committee (1991), Kelkar Committee Report (2003), and the Direct Tax Code (DTC) bill which lapsed due to a change in government.
- The 2025 Act achieves what the DTC sought to do — a comprehensive simplification and modernization of direct tax law.
Connection to this news: The draft rules released on February 7 operationalize the 2025 Act by detailing procedural requirements, and the reduction from 511 to 333 rules mirrors the Act's philosophy of structural simplification.
Participatory Governance and Pre-Legislative Consultation
The practice of seeking public feedback on draft rules before notification reflects India's evolving approach to participatory governance. The Pre-Legislative Consultation Policy (PLCP) adopted by the Government of India in 2014 mandates that all proposed legislation and subordinate legislation be placed in the public domain for a minimum of 30 days before finalization.
- The PLCP was based on recommendations from the National Advisory Council and aims to increase transparency and democratic participation in law-making.
- Notable examples include public consultations on the Data Protection Bill, the Draft National Education Policy, and GST rules.
- The 15-day feedback window (February 7-22) for Income Tax Rules is shorter than the PLCP's recommended 30 days, though this applies to subordinate legislation under an already-enacted statute.
Connection to this news: CBDT's invitation for feedback on four specific categories (language, litigation, obsolete rules, compliance burden) demonstrates structured pre-legislative consultation, allowing stakeholders to shape the final rules before the April 1 implementation date.
Tax Administration Reforms and Compliance Simplification
India has undertaken several tax administration reforms to ease compliance and widen the tax base. The introduction of e-filing (2006), PAN-Aadhaar linking, faceless assessments (2020), and pre-filled ITR forms are part of a broader digitization drive.
- Faceless Assessment Scheme (2020) eliminated physical interface between taxpayers and tax officers.
- Pre-filled ITR forms using data from banks, employers, and mutual funds have reduced filing time significantly.
- The new draft forms are designed with automated reconciliation and prefill capabilities, further reducing manual data entry.
- India's tax base has expanded from 3.36 crore returns filed in 2013-14 to over 8 crore returns in 2024-25.
Connection to this news: The reduction from 399 to 190 forms and the smart form design with prefill capabilities represent the next phase of compliance simplification, building on the digital infrastructure already established.
Key Facts & Data
- Income Tax Act 2025 received Presidential assent on August 21, 2025; effective from April 1, 2026.
- Sections reduced from 819 to 536; chapters from 47 to 23.
- Draft rules reduced from 511 to 333; forms from 399 to 190.
- Public feedback deadline: February 22, 2026.
- Feedback categories: language, litigation, obsolete rules, compliance burden.
- The Income Tax Act 1961 was amended 118 times before being replaced.
- "Assessment Year" and "Previous Year" replaced by a single "Tax Year" concept.