New Income Tax Act 2025 Replacing Earlier 60-Year-Old Income Tax Rules; Effective April 01

The government of India has proposed significant amendments to the 60-year-old Income Tax Act 1961. These revisions in the income tax rules are scheduled to take effect from April 01, 2026, i.e., from the start of the new financial year 2026-27. These changes are aimed at simplifying tax rules, reducing disputes, and making the compliance process easier to understand through clearer language and technology-driven processes.

Here are mentioned some of these key income tax changes to take effect from April 01, from the Financial Year 2026-27:

1. Simplified Law and Fewer Sections

The new income tax act of 2025 will include a reduced number of sections. Previously, there were a total of 819 sections available under the Income Tax Act 1961; now this number has been reduced to 536. On the other hand, chapters have been reduced from 47 to 23. If we talk about the overall word count of earlier income tax rules, now the total words have been reduced to almost half, from 5.12 lakh words to around 2.6 lakh words.

For the first time in Indian history, the use of tables and formulas in lawmaking is more common than long legal paragraphs. To make concepts easier to understand, this time, a total of 39 tables and 40 formulas have been inserted in the new Income Tax Act 2025.

2. Introduction of New ‘Tax Year’ Concept

This is one of the key changes proposed in the Income Tax Act 1961. The new concept of ‘Tax Year’ has been introduced, with an aim to replace earlier confusion between ‘Financial Year’ and ‘Assessment Year.’

In this new concept tax year, income earned within the year in which it is reported and assessed will be amalgamated. Resulted in earlier compliance for taxpayers.

3. Simpler Process of ITR Filing

Several tax experts believe that since most of the information is already available through AIS and pre-filled returns, the return filing process will become simpler.

From the next financial year, it is anticipated that simplified ITR forms will be introduced, which will require clearer reporting and fewer confusing disclosures.

4. Higher Exemptions and Better Relief

Under the New Tax Regime, taxpayers earning income up to Rs. 12 lakh are not required to pay any tax on it due to the introduction of a new rebate under Section 87A, effective from Assessment Year 2024-25. Salaried taxpayers are also being offered a higher standard deduction.

The New Income Tax Act 2025 clearly shows the government’s intention to encourage taxpayers to choose the new tax regime while slowly reducing the importance of the old tax regime.

5. Tech-enabled Compliances

Simplified tech-enabled compliances are expected in the New Tax Act 2025, including faceless assessments. The key objective of the new act is to make tax laws simpler by using standard rules and technology.

Experts believe that by using pre-filled tax data and limiting investigation to only rare cases, the government is showing that it trusts salaried and genuine taxpayers and wants a more trust-based tax system.