New Income Tax Rule 2026 From April 1, 2026: Big Changes in ITR Forms 1 to 7

Income Tax Rule 2026: India's income tax system is about to enter a new era. The government is preparing to implement the Income Tax Act, 2025, from April 1, 2026. This will replace the nearly six-decade-old Income Tax Act, 1961. To implement this major change, the government has released the draft Income Tax Rules 2026, which include new rules for all return forms, from ITR-1 to ITR-7. Let's explain all the rules included in the draft.

These draft rules have been put in the public domain for public feedback from taxpayers, chartered accountants, and professionals. Suggestions are sought until February 22, 2026, after which they will be finalized. The biggest question is how much the new system will change the tax filing process for the common man, and which ITR will apply to whom.

Let's find out What the New Income Tax Rule 2026 is:

ITR-1 is still the simplest

ITR-1, or Sahaj Form, remains true to its name. This form is for residents whose income comes from direct sources such as salary, house rent, and bank interest. The government's clear focus is to ensure that this form is used only for simple tax matters.

The biggest change has been made to the filing method. Almost all taxpayers will now be required to file their returns digitally. Only super senior citizens aged 80 years or above will be exempted from paper filing. Everyone else will have to file their returns online using EVC or digital signature.

ITR-2 is now the default option for complex matters.

ITR-2 will be for those whose income is not from business or profession but whose tax situation is somewhat complex. This includes those with capital gains, multiple house properties, foreign income, or foreign assets. According to the new rules, as soon as a taxpayer crosses the ITR-1 limit, they must directly file ITR-2. The government has tightened monitoring of capital gains and foreign assets, so more information will now be required in this form.

ITR-3 will increase disclosures related to business income.

ITR-3 will remain the primary form for those earning income from business or profession. The draft rules state that if a taxpayer crosses the presumptive taxation limit, they will be required to file ITR-3. This form will now require more details related to perquisites, capital gains, and special income categories. This means that tax disclosures will be more detailed for professionals, traders, and those with higher incomes.

Most Strictness on ITR-4 (Sugam)

The biggest setback may be faced by those filing ITR-4 (Sugam). Although this form will remain for presumptive taxation, its requirements have now been significantly tightened. Taxpayers will not be able to file ITR-4 if they have foreign income or assets, are a director of a company, hold unlisted shares, have an annual income exceeding ₹50 lakh, own more than two houses, or have carried forward losses from previous years. This means that many small businesses and professionals will now have to choose ITR-3.

ITR-5 and ITR-6 will face increased scrutiny.

The basic structure of ITR-5 and ITR-6 will remain the same, but digital compliance and data linking have been strengthened. Filing with a digital signature will be mandatory for companies. Furthermore, ITR-A for business reorganization cases and ITR-BL for block assessments have been better integrated into the system.

ITR-7 tightens regulations on trusts and institutions

ITR-7, used for charitable trusts, religious institutions, and political parties, places a strong emphasis on transparency. Now, complete information on donations, fund use, and audit reports will be directly linked to the return. The government also aims to tighten oversight of tax-exempt institutions.

This article is for general information and awareness purposes only. The information provided is based on various media reports, government draft notifications, and public sources. StackUmbrella does not assume responsibility for providing tax advice, legal advice, or financial decisions.

Please consult your Chartered Accountant (CA) or tax expert before making any important income tax decisions. Final government regulations and notifications are subject to change.

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