New Delhi: India will get a new income tax law from April 1, 2026. The Income Tax Act, 2025 will replace the old Income Tax Act, 1961, which has been in use for more than 60 years.
The government says the
new law is revenue neutral, meaning it does not change tax rates. Its main goal is to make tax rules simple, clear and easy to understand.
Why a new tax law was needed
The old 1961 tax law was made when India was a young country. Over the years, many changes were added to it to match new business models, technology and income sources.
Because of hundreds of amendments, the law became very long and confusing. It had too many sections, sub-sections and footnotes, making it hard for ordinary people to understand their tax duties. This also led to many court cases and disputes.
What is new in the 2025 Act
The new Income Tax Act is much shorter and simpler. The number of sections and overall text has been cut by almost 50 percent.
Many old taxes like wealth tax, gift tax and fringe benefit tax were already removed, but their old rules were still part of the 1961 law. The new Act removes all such outdated parts.
Single ‘tax year’ system
One big change is that the new law removes the confusion between “previous year” and “assessment year”. Now there will be only one “tax year”.
Also, people will be allowed to claim TDS refunds even if they file their tax returns late, without paying any penalty.
Budget changes will be added
Any tax changes announced in the Union Budget 2026-27 on February 1 will be added to the new Income Tax Act.
The rules and tax forms needed to use the new law are being prepared and will be notified after the Budget.
Parliament approval
The Income Tax Act, 2025 was passed by Parliament on August 12, 2025 and got the President’s approval on August 21, 2025. It will now be used from April 1, 2026.
