That is precisely what the government set out to do by introducing the Income-tax Act, 2025—effectively a rewrite of the six-decade-old Income-tax Act, 1961 using clearer language and better-organized sections. Following its passage, the government has now released the draft Income-tax Rules, 2026 for public consultation, with implementation scheduled from April 2026.
The headline message is reassuring: consolidation, rationalization and smarter compliance through pre-filled returns.
But scratch the surface and a familiar contradiction appears. Administrative simplification may be advancing, but taxpayer decision-making, especially for salaried individuals, is quietly getting more complicated.
That tension sits at the heart of the new draft rules.
Fewer rules
At a structural level, the draft rules deliver on their stated objective. The number of rules and prescribed forms has been sharply reduced through consolidation and the removal of redundant provisions. From 511 rules and 399 forms under the old law, the draft Income-tax Rules, 2026 now contain 333 rules and 190 forms.
Income-tax returns are being redesigned with extensive pre-filling, standardized data fields and automated reconciliation.
For the average taxpayer, this should mean less manual data entry and fewer inadvertent disclosure errors. In theory, it should also reduce notices triggered by clerical mismatches. Compliance is being nudged away from interpretation and towards verification.
This is, without doubt, a step in the right direction.
But simplification of administration is not the same as simplification of choice. And that distinction matters far more to taxpayers than policymakers may sometimes assume.
Allowances revived
The real behavioural impact of the draft rules lies elsewhere. Several long-ignored salary allowances have been materially enhanced in nominal terms to account for inflation.
The children education allowance jumps from a token ₹100 per month per child to ₹3,000 per month, while the hostel allowance rises from ₹300 to ₹9,000 per month per child. Transport allowance for certain categories of disabled employees has also been sharply revised upwards. Most consequentially, the reclassification of Bengaluru, Pune, Hyderabad and Ahmedabad as metro cities raises the house rent allowance (HRA) exemption cap from 40% to 50% of salary.
This significantly expands the tax shelter available under the Old Tax Regime.
It will not be amiss to note that all of these benefits exist only under the Old Tax Regime.
For years, salaried taxpayers were nudged towards the New Tax Regime with a simple promise: lower rates, fewer exemptions and less mental arithmetic. Many complied, and the debate appeared settled.
These allowance changes quietly reopen it.
HRA effect
Take the reclassification of Bengaluru as a metro city for HRA purposes. For a large base of salaried employees paying high rents in the city, the higher HRA exemption ceiling materially alters tax outcomes under the Old Tax Regime.
For many mid- to senior-level professionals, this single change can decisively swing the annual tax calculation.
Once allowances begin to make a visible dent in tax liability, regime selection stops being automatic. It becomes an exercise again.
And that brings us to the policy contradiction.
The government’s long-term direction has been clear: the New Tax Regime is meant to be the default. Recently, the Chairman of the Central Board of Direct Taxes stated that as many as 88% of individual taxpayers have already opted for the New Tax Regime.
Against that backdrop, refreshing exemptions that exist only in the Old Tax Regime sends mixed signals. A framework designed to gradually fade into the background is being quietly refurbished.
Decision burden
True simplification reduces decisions, not merely documents them better.
Today, salaried taxpayers must still confront the same annual question: Old or New tax regime. That question may now require deeper computation than before, factoring in allowances, rent levels, family structure and employer payroll design.
In practice, most taxpayers will not trust an automated system or artificial intelligence to optimize a decision that has personal and long-term financial consequences. They will seek reassurance, judgement and expertise.
That is why professional advice continues to matter—and why simplification at the form level does not automatically reduce dependence on Chartered Accountants.
This reality undercuts the idea that administrative simplification alone reduces advisory reliance.
What next
The practical takeaway for salaried individuals is straightforward: do not assume the New Tax Regime remains optimal by default.
The draft rules are open for public comments until 22 February, with final notification expected before April 2026. This is the right moment to ask a harder policy question: is the objective to simplify compliance mechanics, or to simplify taxpayer decisions?
Both are legitimate goals. But they are not the same.
None of this is an argument against the draft rules themselves. Fewer forms and cleaner reporting are welcome. But when taxpayers must still simulate multiple scenarios every year, simplicity remains theoretical.
A tax system feels simple not when forms are shorter, but when choices are fewer.
CA Vijaykumar Puri is partner at VPRP & Co LLP, Chartered Accountants. Views are personal.
