New Delhi: The government is set to release new income tax return (ITR) forms, implementing rules and detailed FAQs within February 2026 to help taxpayers shift smoothly to the new Income Tax Act, 2025. The new law will come into effect from April 1, 2026.
CBDT Chairman Ravi Agrawal said the forms and rules will first be opened for stakeholder consultation. The department will also release explanatory presentations to manage the expected spike in taxpayer queries during the initial implementation quarter from April to June 2026.
Reforms aimed at simpler tax system
The direct tax proposals announced in the Union Budget 2026-27 are part of the government’s broader push to simplify India’s tax structure. The reform process started in July 2024 with a comprehensive review of the Income Tax Act.
The first phase focused on simplifying language and improving readability to reduce disputes and multiple interpretations. The second phase, announced in the latest Budget, introduced structural changes to improve clarity, ease compliance and reduce litigation.
Key measures include decriminalisation of certain offences, penalty immunity in select cases, and simplified compliance procedures. These steps aim to lower compliance costs and improve taxpayer services.
Shift towards new tax regime gains pace
CBDT data shows strong adoption of the new tax regime. Around 88 percent of individual taxpayers filing ITR-1, ITR-2, ITR-3 and ITR-4 have already moved to the new structure. Adoption is also rising among small businesses and professionals.
Nearly 97 percent of taxpayers under presumptive taxation schemes have shifted to the new regime. Additionally, about 60 percent of corporate income has moved to the revised tax structure. The government currently has no plans to introduce a sunset clause for the old tax regime.
Corporate tax and market changes
To make the new tax system more attractive for companies, the Budget proposed changes to Minimum Alternate Tax (MAT). The proposal treats MAT as final tax and reduces the rate to 14 percent from 15 percent earlier.
The Budget also increased Securities Transaction Tax (STT) on derivatives trading to discourage excessive retail speculation. The full market impact of this change is expected to become clearer over time.
