The Income-tax Rules, 1962 is a type of subordinate legislation, specifically a set of Rules, which provides the detailed administrative and procedural framework for implementing the Income-tax Act, 1961. It was created by the Central Board of Revenue (now the Central Board of Direct Taxes or CBDT) using the powers conferred by Section 295 of the 1961 Act. The Rules came into force on the 1st day of April, 1962, to operationalize the new Income-tax Act, 1961, which had replaced the earlier Income-tax Act, 1922.
The Rules detail the practical mechanism of taxation, such as prescribing the various Income Tax Return (ITR) Forms found in Appendix II. They also specify the limits for certain exemptions, like the calculation of House Rent Allowance (HRA) exemption under Section 10(13A) in Rule 2A. Furthermore, the Rules lay down the procedures for compliance, including those related to Deduction of Tax At Source (TDS). The Rules are intrinsically connected to the Income-tax Act, 1961, and are part of the larger tax ecosystem that includes Annual Finance Acts and judicial pronouncements.
The Income-tax Rules, 1962, were frequently amended over the decades, such as the Income-tax (Twenty Second Amendment) Rules, 2025, which added Rule 3C and Rule 3D to set thresholds for perquisite taxation under Section 17(2). However, the entire set of Rules was replaced by the Income-tax Rules, 2026, effective from 1 April 2026, to align with the new Income-tax Act, 2025. The replacement aimed to simplify language, reduce duplication, and standardize digital compliance, notably by introducing the term "Tax Year" to replace the confusing "previous year" and "assessment year" system.