From April 1, the Income Tax Act, 2025, will come into force, replacing the existing six-decade-old tax law and incorporating changes announced for the 2026–27
financial year. Unveiled as part of the Union Budget 2026 by Finance Minister Nirmala Sitharaman on Sunday, the new law aims to simplify tax provisions, reduce complexity, and improve ease of compliance for taxpayers. The government says the revamped act is designed to be shorter, clearer, and more taxpayer-friendly. "This (direct tax code) was completed in record time and the Income Tax Act 2025 will come into effect from April 1, 2026. The simplified income tax rules and forms will be notified shortly, giving adequate time to taxpayers to acquaint themselves with its requirements," the Finance Minister said. The simplified rules and forms will be notified in due course, giving adequate time to taxpayers to acquaint themselves with their requirements. The forms have been redesigned for simpler understanding and compliance for ordinary citizens. Also Read: Budget 2026: Sitharaman's Big 'Coconut' Proposal | What's Behind FM's New Pitch?
What is the new Income Tax Act?
The 2025 I-T law is revenue neutral with no change in tax rates. It has only made direct tax laws simple to understand, removed ambiguities, thereby reducing scope for litigations. It reduces text volume and sections by about 50 per cent vis-a-vis the 1961 Income Tax Act.
The forms have been redesigned, such that ordinary citizens can comply without difficulty, the Finance Minister added.
The new law simplifies the tax timeline by doing away with the distinction between the assessment year and the previous year, replacing it with a single "tax year" framework. It also allows taxpayers to claim TDS refund even when ITRs are filed after deadlines, without any penal charges.
The new Income Tax law was approved by Parliament on August 12, 2025 after a scrutiny by a Parliamentary committee. It had become an Act after receiving assent of President Droupadi Murmu on August 21, 2025.
(With agency inputs)
