Income Tax Rule 2026: If you are a taxpayer, this news could be very important for you. The Income Tax Department is going to make changes to the income tax rules. This change will be implemented on April 1, 2026. The central government will repeal the old Income Tax Act, 1961, and replace it with the new Income Tax Act, 2025. The government’s objective is to make tax laws simpler, more transparent, and easily understandable for ordinary citizens. The new law will remain consistent with the old law in its basic structure, but its language and procedures will be simplified to reduce tax disputes and court cases.
Main Objectives of the New Income Tax Act 2025
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After the implementation of the new law, the tax system will be clearer and less intimidating. Individual taxpayers and businesses will be able to comply with the rules without any complex procedures. The government wants to reduce the complexity of tax laws and make tax payment easier and faster for ordinary citizens.
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No Tax on Income Up to Rs. 12 Lakh
Tax exemption on annual income up to Rs. 12 lakh will continue in 2026. The new tax rules will not have provisions for exemptions or deductions on income, but the tax slabs have been made fewer and simpler. This means that people in the middle-income group will now find it easier to file their taxes.
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According to the new tax slabs, the tax rates based on annual income will be as follows: Income between Rs. 4 lakh and Rs. 8 lakh will be taxed at 5 percent. Tax rates will increase progressively for higher income groups. Income above Rs. 24 lakh will be taxed at 30 percent.
Additional Tax on Cigarettes and Pan Masala
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The government will impose additional taxes on some selected products in 2026. Excise duty on cigarettes will be increased, and a new cess will be levied on pan masala. These taxes will be applicable in addition to GST. The objective is to discourage the consumption of these products and increase revenue.
Possibility of changes in GST rates
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Significant changes in GST rates are unlikely in the new year 2026. This will be the first full year of the new GST framework implemented in September 2025. Before this, taxes were reduced on approximately 375 goods and services. Now, most goods fall under the 5 percent or 18 percent GST bracket. High taxes on products like tobacco will continue as before.
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The government’s focus on customs duty reforms
After GST and income tax reforms, the government is now focusing on customs duty reforms. The 2025-26 budget reduced the customs tariff slabs to 8. Simultaneously, work is progressing rapidly on faceless assessment and digital customs procedures. This will make import and export processes faster, simpler, and more transparent.
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Impact on ordinary taxpayers
The new tax rules will benefit ordinary citizens in several ways. Tax laws will be easier to understand, notices and disputes will be reduced, and the entire process, being digital, will save both time and money. Overall, the new tax system is a major step forward for India towards a modern, simple, and transparent tax regime.