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What changes for Income Tax payers from April 1: Explained in simple terms
The Income Tax Act, 2025, simplifies direct taxes, removing ambiguities and thus reducing the scope of legal actions.
Finance minister Nirmala Sitharaman on Sunday, during the presentation of Union Budget 2026-27, announced that the New Income Tax Act, 2025, will come into effect from April 1, 2026, replacing the six-decade-old tax law.
She stated that the simplified Income Tax rules and forms would be notified shortly to ensure that taxpayers get adequate time to acquaint themselves with the law's requirements. "The forms have been redesigned such that ordinary citizens can comply without difficulty," Sitharaman said.
Besides announcing the new act, the finance minister also extended the deadline for filing I-T returns from December 31 to March 31.
However, no changes were introduced in the tax structure or slabs in this year's budget.
During the Union Budget 2025, taxpayers received substantial relief in tax slabs. The tax structure under the new tax regime:
- 0-4 lakh rupees - Nil
- 4-8 lakh rupees - 5 percent
- 8-12 lakh rupees - 10 percent
- 12-16 lakh rupees - 15 percent
- 16-20 lakh rupees - 20 percent
- 20- 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 introduces no change in the tax slab rates. It simplifies direct taxes, removing ambiguities and thus reducing the scope of legal actions.
The new act also has a streamlined tax structure, with the total number of sections reduced from 819 to 536, the total number of chapters cut from 47 to 23, 16 schedules included, and new tools -- tables and formulas -- introduced for clarity and ease of interpretation.
The new I-T Act has four core objectives:
1. Simplification: Replace obsolete language and redundant provisions with clear, concise, and modern legal text.
2. Digital interpretation: Allow faceless assessments and digital compliance to reduce corruption and human interface.
3. Taxpayer-centric approach: Enhance transparency, improve ease of filing and reduce litigation.
4. Global alignment: Reflect contemporary economic realities, including taxation of digital assets and global income.
What benefits does new I-T Act offer?
The streamlined and modernised framework of the new Act further simplifies the technicalities by replacing the confusing terms 'assessment year' and 'previous year' with just one term -- 'Tax Year'.
According to the new Act, "tax year" means the 12-month period of the financial year commencing on April 1. In case of a business or profession newly set up, or a source of income that has newly come into existence in any financial year, the tax year shall be the period beginning with: a) the date of setting up of such business or profession; or b) the date on which such source of income newly comes into existence, and ending with the said financial year.
The Income Tax Act, 2025, also enables the central government to design new schemes aimed at improving efficiency, transparency and accountability in tax administration.
Compliance has been further simplified in this act, with Tax Deducted at Source (TDS)-related provisions, earlier spanning across multiple sections, have now been streamlined and grouped under a single section - Section 393.
The act allows taxpayers to claim TDS refund even when I-T returns are filed after deadlines, without any penal charges.
The new Act also aims for digital-first enforcement, where the virtual digital space is defined as an environment, area, or realm constructed and experienced through computer technology.
And lastly, the new Income Tax Act, 2025, also introduces a vigorous and taxpayer-friendly framework for resolving disputes.
