Income tax rules due soon, FY27 Budget to see minimal tax law changes

Subscribe to enjoy similar stories. NEW DELHI: The Union Budget for FY27 is unlikely to deliver major changes to income tax law.

Instead, the most consequential shifts for taxpayers are expected to come through a new set of income tax rules that will determine how the revamped Income Tax Act, 2025, operates in practice, according to two people aware of the development. The Finance Bill, 2026, to be tabled in Parliament as part of the FY27 Budget, may carry only essential income-tax proposals such as notifying tax rates for the year and outlining the transition to the new income tax regime from 1 April, the people said.

The contours of the new regime will be defined by rules to be issued shortly by the Central Board of Direct Taxes (CBDT), they added. These rules assume significance as they will shape taxpayer rights, fairness in the system, compliance burden, and the differentiation between procedural breaches and tax evasion.

The regulatory framework will hinge on these rules, as they are expected to cover sensitive procedures under faceless assessment, provide safeguards against excessive official discretion, lay down processes for initiating prosecution and offer guidance on the transition to the new regime. The rules under the Income Tax Act, 2025, have taken on added importance because the new law has been pared down sharply—nearly halving the number of chapters and words compared with the 1961 Act it replaces—in an effort to make it simpler and more reader-friendly.

In the process, several operational and procedural aspects, including those relating to faceless assessment, have been shifted from the law itself to subordinate rules. The parliamentary panel that cleared the Income Tax Bill approved several such