New Income Tax Act 2025 : The Income Tax Act, 2025, seeks to simplify the direct taxation system by eliminating unclear provisions and reducing the likelihood of legal disputes.

On Sunday, while presenting the Union Budget for 2026–27, Finance Minister Nirmala Sitharaman announced that the new Income Tax Act, 2025, will be implemented from April 1, 2026. This legislation will replace the existing income tax law that has been in force for nearly sixty years.

She informed that the revised income tax rules and updated return forms would be notified soon, giving taxpayers enough time to understand and adapt to the new legal framework. Sitharaman noted that the forms have been redesigned to make compliance easier for ordinary citizens.

In addition to unveiling the new Act, the finance minister also extended the deadline for filing income tax returns from December 31 to March 31.

Despite these changes, the government did not announce any revisions to tax slabs or rates in the current budget.

Significant relief had already been provided to taxpayers during the Union Budget 2025 through revised tax slabs under the new tax regime. The applicable structure remains as follows:

Income up to 4 lakh rupees: No tax

• 4 lakh to 8 lakh rupees: 5 percent
• 8 lakh to 12 lakh rupees: 10 percent
• 12 lakh to 16 lakh rupees: 15 percent
• 16 lakh to 20 lakh rupees: 20 percent
• 20 lakh to 24 lakh rupees: 25 percent
• Above 24 lakh rupees: 30 percent

What Is the New Income Tax Act, 2025?

The Income Tax Act, 2025, is revenue neutral and does not alter existing tax slab rates. Its primary objective is to simplify direct taxation by removing ambiguities, thereby lowering the chances of litigation.

The Act introduces a more streamlined structure, reducing the number of sections from 819 to 536 and cutting chapters from 47 to 23. It includes 16 schedules and introduces tables and formulas to improve clarity and ease of understanding.

The new legislation is built around four key objectives:

Simplification: Replace outdated language and repetitive clauses with clear and modern legal terminology.

Digital interpretation: Promote faceless assessments and digital compliance to limit corruption and reduce human interaction.

Taxpayer-focused approach: Increase transparency, simplify filing procedures, and minimize disputes.

Global alignment: Reflect current economic realities, including the taxation of digital assets and global income streams.

What Benefits Does the New Income Tax Act Offer?

One major improvement is the replacement of the confusing terms "assessment year" and "previous year" with a single term, "Tax Year," to reduce complexity.

Under the new Act, a tax year refers to the twelve-month financial period beginning on April 1. For newly established businesses or professions, or newly created income sources, the tax year will start from the date of establishment or income generation and end with the financial year.

The Act also empowers the central government to introduce new schemes aimed at enhancing efficiency, transparency, and accountability in tax administration.

Compliance procedures have been further simplified by consolidating all Tax Deducted at Source (TDS) provisions, which were previously scattered across several sections, into a single section, Section 393.

Taxpayers will now be allowed to claim TDS refunds even if income tax returns are filed after the due date, without facing any penalties.

Additionally, the new law emphasizes digital-first enforcement, defining the virtual digital space as an environment created and experienced through computer-based technology.

Finally, the Income Tax Act, 2025, introduces a strong yet taxpayer-friendly mechanism for dispute resolution.