Income Tax Act, 2025
A Landmark Simplification
The Income Tax Act, 2025 replaces the Income Tax Act, 1961, which had been in operation for over six decades. The 1961 Act had grown to over 819 sections, 47 chapters, and numerous provisos and explanations added piecemeal over time — making it notoriously complex and litigation-prone. The 2025 Act was introduced as a revenue-neutral simplification exercise: it does not change tax rates or the substantive tax burden but restructures provisions in plain language, eliminates redundancies, and introduces digital-first administration. It was passed by Parliament on August 21, 2025 after being introduced as the Income-Tax (No.2) Bill, 2025.
- New Act: 536 sections, 23 chapters, 16 schedules (vs. 1961 Act's 819 sections, 47 chapters).
- Effective date: April 1, 2026 (Tax Year 2026-27 onwards).
- Key structural change: Replaces "Assessment Year" (AY) + "Previous Year" (PY) with a single "Tax Year" aligned to the financial year (April 1–March 31).
- Tax rates remain unchanged — the new regime (lower slab rates, no deductions) and old regime (higher slabs, with deductions) coexist under the new Act as well.
- Faceless assessments (introduced earlier under the Faceless Assessment Scheme, 2020) are now codified and extended to more processes.
● Tracked since March 23, 2026 · last seen September 03, 2026 · updates as the daily brief publishes