New Delhi: In a significant step, the government has notified the Income Tax Rules, 2026. The rules will be implemented from April 1, 2026, and will establish
the full framework for implementing the new Income-tax Act, 2025.
The new rules provide clarity regarding the ‘holding period’, i.e., how long an asset an be held, which directly affects taxation. If an investor is in possession of bonds, debentures, or deposit certificates that were later converted into shares or debentures, the holding period will not be counted from the time of conversion; it will also include the duration for which the original instrument was held by the investor.
Assets Declared under IDS 2016
Now, there will be separate rules for assets declared under the Income Declaration Scheme (IDS), 2016. If the asset is immovable property like land or a house, the holding period will be counted from the actual date of purchase, provided there is a registered deed. For other assets, the holding period will be considered from June 1, 2016.
Transfer from Foreign Company to Indian Subsidiary
If a branch of a foreign company is converted into a subsidiary in India, the holding period of the transferred assets will also be included. This will cover the period during which the asset was held by the foreign branch or the previous owner.
Capital Gains
The new Income-tax Act, 2025 rules clearly define whether capital gains will be treated as short-term or long-term. If the gain is related to assets that are short-term, part of a block of assets, or self-generated assets (such as goodwill), it will be considered short-term. In other cases, if the asset falls under the long-term category, the gain will be treated as long-term. These new rules will provide more clarity in tax calculations for investors and reduce the chances of disputes.
New Rules related to Dividends for Companies
The new Income Tax rules make the process related to dividends for companies clearer and stricter. Companies will be mandated to maintain a complete register of their shareholders within India. Also, the AGM (Annual General Meeting) where the dividend is approved must also be held in India.
The most significant change is that dividend payments will now also be made within India. The objective is to track transactions and strengthen tax compliance, reducing the scope for irregularities or tax evasion.
