RULES 2026 — INTRODUCTORY NOTE

Rule 1 — Short Title and Commencement

BLOCK 1 : RULE TEXT (NEW RULES, 2026)

Short title and commencement.

1. (1) These rules may be called the Income-tax Rules, 2026.

(2) They shall come into force on the 1st April, 2026.

BLOCK 2 : CORRESPONDING RULE IN OLD RULES (1962)

Short title and commencement. [Rule 1 of the 1962 Rules]

1. (1) These rules may be called the Income-tax Rules, 1962.

(2) They shall come into force on the 1st day of April, 1962.

BLOCK 3 : COMMENTARY

Rule 1 of the 2026 Rules mirrors Rule 1 of the 1962 Rules verbatim apart from the change of year and date. The Rules are subordinate legislation issued by the CBDT under section 533 of the 2025 Act (corresponding to section 295 of the 1961 Act). The 1 April 2026 commencement aligns the Rules with the parent Act so that every rule is operative when the Act first comes into force; there is no interregnum during which the Act is in force without supporting Rules.

Source of authority. Section 533 of the 2025 Act empowers the CBDT to make rules "for carrying out the purposes of this Act". The exercise of this power must be intra vires — within the Act's framework — and procedurally compliant: under the parent Act, every rule must be laid before each House of Parliament for a session of thirty days, during which time both Houses may modify or annul. This procedural safeguard (corresponding to section 296 of the old Act) is preserved through the procedural provisions in Chapter XXIII of the new Act.

Continuity of validity-of-Rules jurisprudence. Every Rule under the 1962 framework was challenged from time to time as ultra vires the parent Act; the canonical approach was set by the Supreme Court in CIT v. S. Chenniappa Mudaliar (1969) 74 ITR 41 (SC) — Rules cannot enlarge the scope of the Act, but may operationalise what the Act permits. The same principle applies to the 2026 Rules: any Rule that purports to charge tax on an item not within the Act's charging architecture would be void; any Rule that fixes a procedural mechanism within the Act's grant of rule-making power is valid.

Practical takeaway. (i) For all working papers, opinion notes and audit reports prepared on or after 1 April 2026, cite "Rule [N] of the Income-tax Rules, 2026" instead of "Rule [N] of the Income-tax Rules, 1962". (ii) For periods up to 31 March 2026 — the old Rules continue to govern under the savings clause in section 536 of the 2025 Act read with the parallel provision in the 2026 Rules. (iii) Pending notifications, Forms and instructions issued under the 1962 Rules survive the transition and are deemed to have been issued under the corresponding provisions of the 2026 Rules — until rescinded.

Rule 2 — Definitions

BLOCK 1 : RULE TEXT (NEW RULES, 2026)

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a) "Act" means the Income-tax Act, 2025 (30 of 2025);

(b) "authorised bank" means any bank as may be appointed by the Reserve Bank of India as its agent under the provisions of sub-section (1) of section 45 of the Reserve Bank of India Act, 1934 (2 of 1934);

(c) "Form" means a Form in Appendix III appended to these rules;

(d) "section" means a section of the Act.

(2) Words and expressions used herein and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act.

BLOCK 2 : CORRESPONDING RULE IN OLD RULES (1962)

Definitions. [Rule 2 of the 1962 Rules]

2. (1) In these rules, unless the context otherwise requires,— (a) "Act" means the Income-tax Act, 1961 (43 of 1961); (b) "authorised bank" means any bank as may be appointed by the Reserve Bank of India as its agent under section 45 of the Reserve Bank of India Act, 1934 (2 of 1934); (c) "Form" means a form set out in Appendix II to these rules; (d) "section" means a section of the Act; (dd)-(de)-(df) various other defined terms inserted by Finance Acts; (e)-(g) other defined terms ("company in which public are substantially interested" / "net agricultural income" etc.). (2) Words and expressions used herein and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act.

BLOCK 3 : COMMENTARY

Rule 2 of the 2026 Rules sets out the four foundational definitions used throughout the Rules: "Act" (the parent statute), "authorised bank" (banks authorised by the RBI to receive tax payments), "Form" (the prescribed forms in Appendix III), and "section" (a section of the Act). Sub-rule (2) imports definitions from the Act by reference, ensuring conceptual consistency between the parent statute and the subordinate Rules.

Drafting changes vs old Rule 2. The 1962 Rules had accumulated several letter-suffix definitions over six decades (Rule 2(dd), 2(de), 2(df) etc.). The 2026 Rules drop these as definitions in their own right — the substantive concepts they captured (e.g., "approved valuer", "unique transaction number", "electronic mode" etc.) have been absorbed into the relevant operative Rules. The result is a much shorter Rule 2.

Appendix change. The 1962 Rules' Forms were in Appendix II; the 2026 Rules house them in Appendix III. (Appendix I and Appendix II of the 2026 Rules contain other prescribed material — schedules of depreciation rates, lists of recognised stock exchanges, etc.) Practitioners must update Form-numbering references in templates.

Rule 2(2) — incorporation by reference. The default rule that Act-definitions apply to the Rules has long been the foundation of integrated reading of the Act and Rules. The 16,000-odd cross-references throughout the Rules — particularly the recurring "For the purposes of section ... of the Act" — depend on this incorporation. The Supreme Court in CIT v. Pure Pharma Ltd. (1974) 96 ITR 569 (SC) and Indian Chemical Industries Ltd. v. CIT (2008) 305 ITR 60 (SC) settled the integrated-reading approach; the same principle applies to the 2026 Rules.

Continuity of jurisprudence. K. P. Varghese v. ITO (1981) 131 ITR 597 (SC) — a Rule cannot impose tax not authorised by the Act; CIT v. Sandvik Asia Ltd. (2006) 280 ITR 643 (SC) — Rules are not to be construed in isolation from the Act; J. M. Shah v. JCIT (2017) 393 ITR 35 (Bom.) — definitional consistency between Act and Rules. All continue to apply.

Practical takeaway. (i) When researching any Rule, always cross-check whether the Act provides a specific definition that overrides any general definition. (ii) For "authorised bank" — RBI's list of authorised banks is published periodically; verify before placing tax-payment instructions. (iii) For "Form" — verify the Form is in Appendix III of the 2026 Rules; older Forms (Appendix II of 1962 Rules) survive in the interim under section 536 savings until rescinded but may need re-formatting for online filing.

Rules 1-2 — At a Glance

Mapping table for Rules 1 and 2:

Practitioner notes

• Cite "Income-tax Rules, 2026" for periods on or after 1-4-2026.
• Cite "Income-tax Rules, 1962" for periods up to 31-3-2026 — the savings clause keeps the old Rules alive for those periods.
• Forms re-numbered into Appendix III; track the CBDT's old-to-new Form mapping circular when issued.
• Definitions in the Act apply to the Rules (Rule 2(2)); always cross-check the Act before relying on a Rule definition in isolation.

— End of Rules Volume I —