Draft Income Tax Rules 2026 explained: What changes for salaried, investors and NRIs

The draft Income-tax Rules, 2026 signal a major reset of India’s tax rulebook. While much of the change is structural, several provisions directly affect individual taxpayers, salaried employees, investors, NRIs and businesses. 

A new tax rulebook from April 2026 

From April 1, 2026, taxpayers will no longer be governed by the six-decade-old Income-tax Rules, 1962. The new rules are aligned with the Income-tax Act, 2025 and are intended to make tax compliance more modern, consistent and easier to interpret. 

More clarity, fewer grey areas 

Definitions, procedures and forms have been streamlined and consolidated. For taxpayers, this could mean fewer interpretational disputes and more predictable outcomes during assessments and appeals. 

Stricter valuation rules for shares and assets 

Whether you hold listed or unlisted shares, partnership interests or overseas investments, the draft rules lay down detailed fair market value (FMV) formulas. This directly affects capital gains calculations, ESOP taxation and indirect transfer cases, especially for startup founders, investors and NRIs. 

Tougher scrutiny of offshore and NRI transactions 

Income arising from assets located in India — even when transferred overseas — will be more precisely attributed and taxed. Non-residents and foreign investors may face tighter compliance and reporting requirements, particularly in indirect transfer cases. 

Digital economy under sharper tax lens 

The rules clearly define thresholds for “significant economic presence”, bringing more non-resident digital businesses and platforms into India’s tax net based on revenue or user base, even without a physical presence. 

Capital gains holding period clarified 

The method for calculating holding periods in complex cases — such as asset conversion, restructuring or declaration schemes — has been explicitly defined. This reduces ambiguity for taxpayers dealing with long-term versus short-term capital gains. 

Revised perquisite taxation for salaried employees 

Valuation rules for employer-provided benefits like housing, cars, loans, gifts, food, utilities and club memberships have been updated in detail. Salaried taxpayers may see clearer — but in some cases tighter — tax treatment of workplace perks. 

Employer contribution above ₹7.5 lakh still taxable 

The draft rules continue the framework for taxing annual accretion (interest or returns) on employer contributions exceeding ₹7.5 lakh to specified retirement funds, with a clearer computation formula. 

More defined rules for exemptions and deductions 

Thresholds for salary income, gross total income and voluntary retirement benefits have been clearly prescribed, reducing room for interpretation but also limiting flexibility. 

Higher compliance expectations for markets and intermediaries 

While aimed at stock exchanges and institutions, enhanced audit trails and reporting norms could indirectly increase scrutiny of high-frequency traders and derivative market participants. 

For taxpayers, the Draft Income-tax Rules, 2026 don’t dramatically change tax rates — but they do change how income is valued, attributed and scrutinised. The emphasis is clearly on clarity, digitisation and tighter enforcement, particularly for complex financial arrangements and cross-border transactions.