Income Tax Rules - 2026: Key Highlights & What Businesses Need to Know

Companies must maintain shareholder registers within India, declare dividends only in India, and make payments domestically, keeping dividend flows traceable and under domestic control.

To qualify as a recognised stock exchange, an exchange needs SEBI approval, a full audit trail of transactions kept for 7 years, and monthly reporting of any transaction modifications.

The rules set out detailed methods for determining the holding period in complex situations, such as conversions or foreign company restructuring, and for classifying assets as short-term or long-term. This gives clearer footing for taxing modern financial instruments and restructuring transactions.

Issuing zero coupon bonds now requires prior application at least 3 months before issuance, a bond tenure of 10 to 20 years, and adherence to prescribed timelines for deploying the investment.

Where a non-resident's income can't be precisely determined, tax authorities can compute it based on a percentage of turnover or proportionate global profits.

The rules also define "Significant Economic Presence" thresholds for digital and remote businesses operating in India: a transaction value of ₹2 crore, or 3,00,000 users in India.

Expenditure relating to exempt income is capped at 1% of average investments, and total disallowance can't exceed the total expenditure claimed, simplifying what used to be a more complex calculation.

Detailed valuation rules now cover accommodation (based on city population and salary percentage), motor vehicles, and utility and education benefits, standardizing how perquisites are taxed across employers.

Clear valuation methods have also been introduced for listed and unlisted shares, foreign entities holding Indian assets, and partnership interests — relevant for cross-border transactions and indirect transfer taxation.

Research institutions and companies face a stronger approval framework, with mandatory audits, reporting requirements, and time-bound approvals.

Specific eligibility conditions now apply to infrastructure projects and affordable housing, and new approval mechanisms cover skill development projects and agricultural extension initiatives.

The ₹10,000 cash payment limit has clarified exceptions, including payments to banks, government bodies, and farmers, and payments in areas without banking access.

Depreciation rates and conditions have been standardized, with special provisions for technology-driven manufacturing.

• Increased compliance requirements across reporting, valuation, and documentation
• Greater clarity on taxing complex transactions, especially cross-border ones
• Expanded tax net for digital and non-resident businesses
• Stronger incentives for infrastructure, R&D, and skill development