Income Tax Act, 2025, a comprehensive rewrite of the country’s six-decade-old tax law, will come into force on April 1, 2026, Finance Minister Nirmala Sitharaman announced in the Union Budget 2026–27. This legislation replaces the Income Tax Act, 1961, marking one of the most significant updates to India’s direct tax system in decades.
The new law is designed to simplify the tax system and reduce confusion for taxpayers, rather than alter existing tax rates. Individuals and businesses will continue under the same tax slabs and rates as before. The government says the overhaul will cut complexity, reduce litigation, and make tax compliance more intuitive. The Act uses clearer language, fewer provisions, and simpler processes to reduce ambiguity and make it easier for taxpayers to understand their obligations.
As part of the reforms, authorities will introduce updated tax forms and clear guidance ahead of implementation, allowing taxpayers to adjust to the changes smoothly. One major administrative change is the extension of deadlines for filing or revising Income Tax Returns (ITRs). The revision deadline has been moved from December 31 to March 31, with a small fee for late revisions, and different types of returns will have staggered filing timelines to ease the compliance burden.
Other taxpayer-friendly measures include lower Tax Collected at Source (TCS) rates for overseas education and travel-related payments, as well as simplified Tax Deducted at Source (TDS) procedures, particularly for smaller taxpayers and non-resident property transactions.
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