India has opened public consultation on the draft Income-tax Rules, 2026, which set the procedures and forms that will support the Income-tax Act, 2025 from April 1, 2026. The draft keeps ITR-1 to ITR-7, but it narrows access to simplified returns and adds more structured disclosures for many filers.
The draft rules keep the familiar return series for individuals, firms, companies, and trusts. Taxpayers will still choose ITR forms based on income type, residency, and entity category.
However, the draft draws sharper lines around simplified filings. For example, the draft positions ITR-2 as the next step when a taxpayer no longer fits the ITR-1 conditions. It also signals heavier schedules for business and professional income, which may push more taxpayers toward detailed reporting forms.
The biggest shift targets presumptive taxation users who file ITR-4 (Sugam). The draft list restricts ITR-4 for taxpayers with foreign assets or foreign income, company directorships, unlisted equity share holdings, income above ₹50 lakh, more than two house properties, carried-forward losses, or agricultural income above ₹5,000. As a result, more small businesses and professionals may need ITR-3 instead of Sugam.
The draft rules reinforce electronic filing as the standard process across categories. Central Board of Direct Taxes has asked stakeholders to review both rules and forms and submit targeted suggestions.
The draft also reduces the compliance catalogue by consolidating delegated legislation. It cuts the framework from 511 rules and 399 forms under the 1962 rules to 333 rules and 190 forms in the 2026 draft.
Alongside consolidation, the draft redesigns forms for structured, data-led processing. The official note says the changes aim to improve understanding and that “process simplifications… will help in ease of living and general ease of business.”
The draft rules and forms remain open for comments until February 22, 2026. The documents and navigators sit on the tax department’s website, including separate pages that list the draft rules and the draft forms.
Press Information Bureau said the Ministry of Finance launched an online utility on the income tax e-filing portal to collect feedback. The utility has stayed live since February 4, 2026, and it uses OTP validation. It also asks commenters to tag the exact rule, sub-rule, or form number.