Income Tax Act 2025: Important Features for Taxpayers

The Income Tax Act, 2025, was introduced to replace the current Income Tax Act, 1961, with the aim of simplifying the tax framework in India. The new act brings clarity in the language and restructures provisions to avoid confusion among taxpayers. The Income Tax Act, 2025, is applicable from April 2026.

The reform highlights India’s effort to align with international standards, make compliance simpler for businesses, and create a tax system that promotes transparency. The new Income Tax Act has been made much simpler, with fewer sections and chapters, making it easy to read. The new Act gives clear schedules, tables, and formulae for better understanding. Let us know some key changes introduced in the Income Tax Act, 2025.

Ease of Compliance

Many provisions have been consolidated to bring more clarity. For example, the rules regarding TDS are now grouped under Section 393, instead of being spread across different sections. This will make sure that similar provisions are put together so that the taxpayers can easily find them without having to go to different sections.

Introduction of ‘Tax Year’

The Act replaces the confusing terms ‘Assessment Year‘ and ‘Previous Year‘ with a single term called ‘Tax Year‘, defined as the financial year starting on 1st April. This makes it easier for taxpayers to know which period their income and tax filings relate to.

Digital-First Enforcement

The Act defines Virtual Digital Space (like emails, cloud servers, social media, online trading accounts, etc.) as an environment, area, or realm that is constructed and experienced using computer technology. Additionally, the definition expands Virtual Digital Assets to include all digital assets with value, such as cryptocurrencies or similar technologies.

Dispute Resolution

A stronger, more taxpayer-friendly system has been introduced for resolving disputes under the Income Tax Act, 2025.

Authority to Design Schemes

The Central Government has been given the authority to frame schemes to improve tax administration by:

• Reducing direct interaction with taxpayers through technology, and
• Using resources more efficiently through economies of scale and functional specialisation.