India’s new Income Tax Act 2025: Simpler, clearer, digital

January 29, 2026 Finance Talk Valli Sarvani

India is preparing for a major shift in direct taxation with the new Income Tax Act, 2025.

The new law replaces the six-decade-old Income-tax Act, 1961.

It focuses on simplicity, clarity, and easier compliance. Moreover, it aims to reduce disputes and improve trust between taxpayers and authorities.

One of the most visible changes is structural simplification. The number of sections has dropped from 819 to 536. Similarly, the number of chapters has reduced from 47 to 23.

As a result, the law is easier to navigate. Additionally, the word count has nearly halved, improving readability.

Importantly, the Act introduces tables and formulas. Around 39 tables and 40 formulas replace lengthy legal text. Therefore, ambiguity and interpretation disputes are expected to decline.

Another key reform is the introduction of a single “Tax Year.” Earlier, taxpayers dealt with both the previous year and the assessment year.

Now, income earning and assessment fall within one period. Consequently, compliance becomes simpler and more intuitive.

The Act also renumbers and reorganises sections. For instance, the popular Section 80C now appears as Section 123.

Although adjustment will take time, the new structure is more logical. Over time, this should improve understanding.

Technology plays a central role in the new framework. Assessments, refunds, and communications will be largely faceless.

Hence, human interaction reduces, timelines improve, and transparency increases. Disputes are also expected to fall.

The law further updates rules for digital and global income. Definitions related to virtual digital assets are clearer. Likewise, global income provisions align with modern economic realities.

For individual taxpayers, relief continues under unchanged tax rates and slabs. However, enhanced rebates make income up to ₹12 lakh effectively tax-free. In addition, a higher standard deduction benefits salaried individuals.

Filing returns should also become easier. Simplified ITR forms with fewer disclosures are expected. Therefore, compliance costs may be reduced.

To prepare, taxpayers should review slabs and rebates for FY 2025–26. They should also track CBDT notifications and draft rules. Meanwhile, procedural changes may appear before full implementation.

The Income Tax Act, 2025, takes effect from April 1, 2026. The new Act signals a cleaner, modern, and taxpayer-friendly tax system.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on March 03, 2017