Income-tax Rules, 2026 notified: What changes for compliance, charitable trusts under new tax regime

With the April 1, 2026, transition to the new tax regime fast approaching, the government has notified the Income-tax Rules, 2026, completing the legislative architecture required to operationalise the Income-tax Act, 2025. The move replaces the decades-old Income-tax Rules, 1962, alongside the Income-tax Act, 1961, marking a structural reset of India’s direct tax framework.

The newly notified 976-page rulebook largely retains the contours of the draft rules released earlier this year, signalling policy continuity. Importantly, the rules do not introduce any new taxes. Instead, they focus on tightening compliance, strengthening disclosures and expanding the use of digital reporting systems, reflecting the government’s broader push towards data-driven and technology-led tax administration.

According to an tax expert, the emphasis of the new rules is clearly on improving processes rather than altering the tax burden. “The Income-tax Rules, 2026, are largely procedural in nature. They are aimed at streamlining compliance, improving reporting standards and enabling better monitoring through digitisation,” he said.

A key area of change under the new rules is the compliance framework for charitable trusts and non-profit organisations. The government has introduced a common application form for both registration under charitable provisions and approvals related to donations, a move that is expected to simplify procedures and reduce duplication. This consolidation is likely to ease administrative friction, particularly for organisations that previously had to navigate multiple approval processes.

The rules also provide for centralised processing of provisional registration applications through the Centralised Processing Centre (CPC), underscoring a shift towards automated and standardised decision-making. At the same time, safeguards have been built in to prevent misuse. Provisional registration may be treated as non-existent or invalid in cases where the trust has already commenced its activities or is registered under another specified provision, thereby ensuring that the provisional route is not used retrospectively.

In a notable addition, the framework now allows trusts to surrender provisional registration, provided no tax benefits have been claimed and the entity undertakes not to claim such benefits going forward. In such instances, the registration will be treated as if it had never been granted. This provision is expected to benefit organisations that may have obtained registration but did not eventually proceed with operations.

The rules also introduce a more structured compliance requirement for changes in the utilisation of accumulated income. Charitable organisations will now be required to file a prescribed form to seek approval for any change in the purpose for which such income has been set aside, bringing greater transparency and oversight to fund utilisation.

At the same time, the government has eased the compliance burden in certain areas. The record-keeping requirement for charitable organisations has been rationalised, with books of account and supporting documents now required to be maintained for six years from the end of the relevant tax year, compared to the earlier requirement of ten years from the end of the assessment year. This is expected to reduce long-term administrative overheads while aligning retention norms with broader tax timelines.

He noted that these changes reflect a calibrated approach. “While the rules tighten oversight through better reporting and monitoring, they also introduce measures that reduce compliance burden, such as shorter record retention periods and streamlined processes,” he said.

Overall, the notification of the Income-tax Rules, 2026, marks the final step in India’s transition to a revamped direct tax regime. While taxpayers may not see a change in tax rates, the compliance landscape is set to become more structured, digital and closely monitored, signalling a shift towards greater transparency and efficiency in tax administration.

Source from: https://www.cnbctv18.com/personal-finance/income-tax-rules-2026-notified-what-changes-for-compliance-charitable-trusts-under-new-tax-regime-ws-l-19873438.htm