What Happened
- The Income Tax Department has invited stakeholder views on draft rules and forms to be notified under the new Income-tax Act, 2025, which takes effect 1 April 2026.
- The CBDT seeks suggestions in four priority areas: simplifying language, reducing litigation, lowering compliance burden, and identifying outdated provisions.
- Feedback can be submitted via the e-filing portal using OTP-based verification.
- The draft rules reduce the number of rules from 511 to 333 and forms from 399 to 190.
- The feedback window opened on 4 February 2026, with final notification expected in early March 2026.
Static Topic Bridges
Income-tax Act, 2025 — A Generational Overhaul
The Income-tax Act, 2025 replaces the Income-tax Act, 1961, which had been in operation for over 63 years. The new Act received Presidential assent on 21 August 2025 and contains 536 sections across 23 chapters and 16 schedules — down from approximately 819 sections and 47 chapters. The word count was halved from 5.12 lakh to 2.60 lakh words. Key structural innovations include converting all provisos and explanations into subsections, introducing the unified "Tax Year" concept (replacing both "Previous Year" and "Assessment Year"), and embedding digital-first procedures.
- Presidential assent: 21 August 2025
- Effective date: 1 April 2026
- Sections: reduced from 819 to 536
- Chapters: reduced from 47 to 23
- Schedules: 16 (new)
- Word count: 5.12 lakh → 2.60 lakh (49% reduction)
- "Tax Year" replaces "Previous Year" and "Assessment Year"
- Transition: assessments for years before 1 April 2026 continue under the 1961 Act
Connection to this news: The draft rules operationalise the new Act. Their quality directly determines whether the Act's simplification promise translates into actual compliance ease for taxpayers. The public consultation process ensures that practitioners and taxpayers can flag ambiguities before the rules become final.
Participatory Governance and Pre-Legislative Consultation
Pre-legislative consultation is a governance mechanism where the government seeks public input before finalising rules, regulations, or policies. India's Pre-Legislative Consultation Policy (2014) mandates that all ministries and departments place draft legislation and subordinate legislation in the public domain for at least 30 days before finalisation. This practice enhances democratic legitimacy, reduces post-implementation disputes, and improves the quality of legislation by incorporating diverse perspectives.
- Pre-Legislative Consultation Policy: adopted 2014
- Minimum consultation period: 30 days in public domain
- Platforms: ministry websites, e-governance portals (e-filing portal for tax rules)
- Notable examples: GST rules (2017), data protection bill (2019, 2022), NEP 2020 draft
- Benefits: reduced litigation, higher compliance, greater public trust
Connection to this news: CBDT's invitation for stakeholder feedback on draft tax rules through the e-filing portal is a direct application of the pre-legislative consultation principle, allowing chartered accountants, tax lawyers, and ordinary taxpayers to suggest improvements before the rules are notified.
Direct Tax Administration and Compliance Modernisation
India's direct tax administration has undergone significant digitalisation, including e-filing (mandatory for most taxpayers), faceless assessment (since 2020), faceless appeals (since 2021), and the Annual Information Statement (AIS) that pre-populates return data from third-party sources. The number of income tax return filers has grown from approximately 3.6 crore (FY14) to over 8.5 crore (FY25). The reduction from 399 forms to 190 under the new rules is expected to further simplify the compliance process.
- E-filing: mandatory for income above Rs 3 lakh (under new regime)
- Faceless assessment: launched 2020 (eliminated human interface)
- Faceless appeals: launched 2021
- Annual Information Statement (AIS): comprehensive third-party data for pre-filled returns
- ITR filers: 3.6 crore (FY14) → 8.5+ crore (FY25)
- Processing time for e-filed returns: average 10-15 days
- Forms reduction: 399 → 190 under draft 2026 rules
Connection to this news: The pre-filled forms mentioned in the draft rules build on the AIS/TIS infrastructure, where income data from employers, banks, mutual funds, and property registrars is automatically populated — reducing manual data entry and errors.
Key Facts & Data
- Income-tax Act, 2025: effective 1 April 2026
- Old Act duration: 63+ years (1961 Act)
- Sections reduced: 819 → 536
- Rules reduced: 511 → 333
- Forms reduced: 399 → 190
- Word count: 5.12 lakh → 2.60 lakh
- Feedback window: opened 4 February 2026
- ITR filers in India: over 8.5 crore (FY25)