New Income Tax Rules 2025: India is set to overhaul the direct taxation system with the introduction of New Income Tax Rules this year, aimed at simplifying the law, reducing disputes, and making compliance
easier through clearer language and technology-driven processes.
The new Act, a comprehensive rewrite of the six-decade-old 1961, is expected to reshape how taxpayers read, understand, and comply with income tax rules in the years ahead.
Simpler Law, Fewer Sections
One of the biggest changes is the massive clean-up of the law’s structure. The number of sections has been cut from 819 to 536, while chapters have been reduced from 47 to 23. The overall word count has almost halved—from 5.12 lakh words to around 2.6 lakh words.
For the first time, the law makes wide use of tables and formulas instead of long legal paragraphs. As many as 39 tables and 40 formulas have been introduced to reduce ambiguity and interpretation disputes that plagued the old Act.
One ‘Tax Year’ Instead of Two
The existing system uses both a previous year and an assessment year, often confusing taxpayers. The new law replaces this with a single, uniform ‘Tax Year’, aligning income earning and tax assessment into one clear period. This move is expected to make compliance easier for individuals and businesses.
Renumbered and Reorganised Sections
The Act also introduces a completely new numbering system. Familiar provisions have been shifted to new sections—for example, Section 80C is now Section 123. While this will require some initial adjustment, the restructuring is designed to make the law more logical and user-friendly in the long run.
Digital-First and Faceless Processes
The 2025 Act puts strong emphasis on technology-driven and faceless procedures. From assessments to refunds, the focus is on reducing human interface, speeding up processes, and providing clearer timelines. The aim is to lower disputes and make tax administration more transparent.
Clearer Rules for Digital and Global Income
To keep pace with a changing economy, the law updates definitions related to virtual digital assets and global income sources. These clarifications are meant to cover newer forms of income without creating uncertainty for taxpayers.
What Changes for Individual Taxpayers?
While tax rates and slabs remain unchanged, several taxpayer-friendly measures are already visible.
Higher Exemptions and Better Relief
Under the revised tax regime, income up to Rs 12 lakh effectively becomes tax-free through enhanced rebates. A higher standard deduction also benefits salaried taxpayers, increasing take-home pay for a large section of earners.
Easier ITR Filing
From the next financial year, simplified ITR forms are expected, with clearer reporting requirements and fewer confusing disclosures—an outcome of the cleaner legislative framework.
More Certainty, Fewer Disputes
Clearer language, better-structured deductions, and consolidated presumptive schemes are expected to reduce litigation and interpretation-related disagreements between taxpayers and the tax department.
What Should Taxpayers Do Now?
- Review updated slabs and rebates for FY 2025–26 to plan taxes and investments better
- Track CBDT notifications and draft rules as the new framework is rolled out
- Prepare for transition, as procedural changes will start reflecting even before full implementation
When Will the New Act Apply?
The Income-tax Act, 2025 received presidential assent in August 2025 and will come into force from April 1, 2026. This means tax filings for FY 2025–26 (AY 2026–27) will still largely follow the 1961 law, though several administrative and procedural changes will begin earlier.
Overall, the new Act marks a decisive shift toward a simpler, clearer, and more modern tax system. While most structural changes take effect from April 2026, their impact is already shaping taxpayer expectations and compliance practices today.
