While the new Income tax Act 2025 does not completely overhaul the existing provisions, it simplifies the language and enhances the presentation of the law. The core principles remain unchanged, but the new Income tax Act 2025 aims to make the tax provisions more taxpayer-friendly.
Through simplification, it seeks to promote greater transparency and efficiency for both taxpayers and the government. Below are the key changes introduced in the Income Tax Act, 2025, as compared to the Income Tax Act, 1961:
- The Income Tax Act, 2025 will replace the existing Act, effective from April 1, 2026.
- The new Act focuses on simplifying and modernizing India’s direct tax laws, streamlining provisions for greater clarity and ease of compliance. Most tax rates and regimes for individuals and corporations remain unchanged.
- It introduces the concept of a “tax year,” replacing the terms “assessment year” and “previous year” to improve clarity and consistency.
- Obsolete and redundant sections have been removed, and the legal language has been simplified to make the law more accessible to taxpayers.
- The scope of taxation on virtual digital assets (such as cryptocurrencies) has been expanded.
- All TDS-related sections under the current Act (Sections 192 to 194T) have been consolidated into a single section—Section 393. The applicable rates and threshold limits remain unchanged.
- The language throughout the Income tax Act 2025 has been simplified to ensure better understanding and usability.
- The number of sections has been reduced to 536.
- In the new Income tax Act 2025, all sections are numbered sequentially, eliminating the use of alphabets in section numbers. This may give the impression of an increased section count, but substantively, it is not the case.
- There are no changes to the due dates under the new Act.
- The option to opt out of the default new tax regime continues to be available under the Income Tax Act, 2025. The new regime remains the default.
