New Income Tax Law April 2026: Key Changes & FAQs
- Shyam Singh
- 3 hours ago
- 3 min read
Starting April 1, the New Income Tax Act, 2025, will be implemented, marking a significant update to the tax legislation that has been in place for over sixty years. This new law will integrate the modifications introduced in the 2026–27 Budget, reflecting the latest adjustments in tax policy.
Significant modifications concerning the taxation of salaried individuals, corporations, Hindu Undivided Families (HUFs), and other entities, as outlined in the 2026–27 Budget on February 1, are set to be integrated into the upcoming Income Tax Act, 2025.
Read also more: How Income Tax Software Companies Should Prepare for Bill 2025
The Simplified Income Tax Act, 2025, which Includes a Set of Explained FAQs
Understanding the Simplified Income Tax Act, 2025
The Income Tax Act, 2025 represents a significant update, intended to replace the longstanding Income Tax Act of 1961, which has been in effect for over sixty years. This new legislation is set to take effect on April 1, 2026, and will encompass all tax modifications introduced in the Union Budget for the fiscal year 2026–27.
Reasons for Replacing the Income Tax Act, 1961
The 1961 law was established 64 years ago, reflecting an economic, technological, and business landscape that was vastly different from today. Since its enactment, numerous amendments have been introduced, resulting in a framework that has become increasingly bulky and complex, making it challenging for taxpayers to navigate and comprehend.
Recent changes in income-earning methods, business operations, and the pervasive integration of technology have highlighted the necessity for a comprehensive update to the existing tax framework. There is a growing demand for a modernised and simplified tax law to better align with these evolving practices.
Key Aims of the New Income Tax Act
Here are the primary objectives of the new law:
Simplify direct tax laws
Remove ambiguities and overlapping provisions
Reduce litigation and disputed tax demands
Make tax compliance easier for taxpayers
Find Out How the New Law is Simpler Than the Old One
Understanding the Income Tax Act, 2025
Cuts Overall Text and Sections by Around 50%
Uses simple, clear, and more straightforward language.
Eliminates outdated provisions associated with abolished taxes
Reduces Overlapping References Across Sections
This approach simplifies the process for taxpayers, allowing them to clearly understand their obligations without needing to seek professional help.
Learn About the Major Structural Changes Introduced by the New Act
The newly enacted law simplifies the tax process by introducing a single ‘tax year’ system, which eliminates the earlier complex distinctions that were often confusing for taxpayers.
Previous Year, and
Assessment Year
These changes simplify compliance and make it easier to understand timelines.
What Are the Changes and Tax Slabs in the New Act?
Tax rates are established through the Finance Act, which is included in the Union Budget that is presented each year on February 1.
In the upcoming 2026–27 Budget, any modifications to tax rates or income slabs will be seamlessly integrated into the new Income Tax Act of 2025. This ensures that the latest fiscal adjustments are reflected in the tax framework without delay.
What Penalties Will Apply for Late Filing Under the New Law?
The recent Act allows taxpayers to claim TDS refunds even if they file their income tax returns (ITRs) after the designated due date. Importantly, they will not face any penalties when making these refund claims.
Which Taxes Are Covered Under the Old 1961 Act?
Let’s look at the Income Tax Act, 1961, which includes provisions related to:
Personal income tax
Corporate tax
Securities Transaction Tax (STT)
Historically, various taxes have been implemented, including wealth tax, gift tax, and fringe benefit tax. However, many of these levies have since been abolished.
Over time, many provisions have become redundant or irrelevant.
How the New Act Handles Obsolete Provisions
Here’s what the Income Tax Act, 2025 removes:
Sections related to abolished taxes
Outdated provisions and amendments
Redundant chapters and clauses
This creates a streamlined, consolidated law free from legacy clutter.
When Did the New Income Tax Law and Rules Receive Approval?
The Bill was passed by Parliament on August 12, 2025
It received the President’s assent on August 21, 2025, thereby becoming an Act.
The drafting of the rules to implement the Act is currently underway, and these guidelines are anticipated to be announced following the Union Budget for the fiscal year 2026-27.
When Are Tax Rules and Return Forms Expected to Be Released?
These include rules relating to:
Advance tax
Tax Deducted at Source (TDS)
As of now, the rules under the Income Tax Act, 2025, are in the process of being developed. Following the establishment of these rules, the relevant tax return forms, which will include those for Advance Tax and TDS payments, will be officially announced.
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