Income-tax Rules 2026 vs Rules 1962: how to identify the applicable rules

An Act lays down the charge; the Rules supply the detail – how a perquisite is valued, which form to file, how interest is computed, what a certificate must contain. The Income-tax Rules, 1962 served the 1961 Act. With the Income-tax Act, 2025, the government notified the Income-tax Rules, 2026 on 20 March 2026, effective from 1 April 2026.

The new Rules in numbers

Forms were merged and renumbered. Some well-known examples: Form 16 → Form 130; Form 12BB → Form 124; Forms 26QB/26QC/26QD → Form 141; Forms 16B/16C/16D → Form 132. See our old-to-new form mapping.

Which Rules apply? A simple test

Ask: which year does the document or compliance relate to?

• Return for FY 2025-26 filed in 2026 → 1962 Rules and existing ITR forms.
• Tax audit report for FY 2025-26 → Forms 3CA/3CB/3CD under the 1962 Rules.
• TDS on a payment made on 10 May 2026 → 2026 Rules and the new statements.
• Salary TDS certificate for Tax Year 2026-27 (issued by 15 June 2027) → Form 130.
• Reply to a notice for AY 2023-24 → 1962 Rules where procedure is relevant.

Key changes for salaried employees

• HRA: the 50% limit now covers eight cities – Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Others remain at 40%. HRA is relevant only in the old regime.
• Allowances (old regime): children's education allowance up to ₹3,000 per child per month and hostel allowance up to ₹9,000 per child per month were notified in the new Rules, as reported in the department's explanatory material.
• Meal vouchers: tax-free value raised to ₹200 per meal (old regime).
• Declarations: Form 124 replaces Form 12BB; landlord details are required for HRA claims.

Key changes for businesses and deductors

• New TDS statement formats and section codes aligned with Sections 392–394 of the Act.
• A single Form 141 for individuals deducting TDS on property purchase, rent and contract/professional payments, with Form 132 as the certificate.
• Renumbered forms for lower deduction certificates (Section 395), remittances to non-residents, and audit reports.
• Some forms are being issued in phases on the portal; check the utility versions before filing.

Worked example: HRA under the old and new Rules

Example: Neha lives in a rented flat in Pune. She earns basic salary of ₹9,00,000 a year, receives HRA of ₹3,60,000 and pays rent of ₹3,00,000. She opts for the old regime.

Here the rent limb is the lowest, so the city change makes no difference. Had she paid rent of ₹5,00,000, the exemption would be ₹3,60,000 in both years (capped by actual HRA). The higher city percentage helps mainly where basic salary is low relative to rent. Check your figures with the HRA calculator.

How to read a rule reference correctly

• Look for the year at the top of the form or the notification number – forms under the 2026 Rules carry the new numbers.
• Where a circular issued under the 1962 Rules is still relevant, it continues under the savings clause unless inconsistent with the new Rules.
• For valuation of perquisites (car, accommodation, ESOPs), confirm the rule number in the 2026 Rules before preparing Form 130.

Common mistakes

• Using the old Form 26QB challan for a property bought in May 2026.
• Applying the eight-city HRA list to FY 2025-26 returns – it applies only from Tax Year 2026-27.
• Assuming every old form has a one-to-one replacement; many were merged.

Key takeaway

The year decides the Rules. Keep the 1962 Rules for anything up to FY 2025-26 and switch to the 2026 Rules from Tax Year 2026-27. For employers, the first Form 130 and new quarterly statements are the main tests. Our TDS and payroll team can help set up the transition.