New Income Tax Act, 2025 to Replace 60-Year-Old Tax Law from April 1

New Income Tax Act, 2025 to Replace 60-Year-Old Tax Law from April 1

From April 1, a new Income Tax Act, 2025, will replace the old tax law that has been in place for nearly 60 years. This new law does not change tax rates or increase taxes, so it is revenue neutral. Its main objective is to make tax rules simpler and clearer for everyone.

The government has introduced a new income tax law that makes paying and understanding taxes much easier.  The new act is much shorter, with about 50% fewer sections compared to the Income Tax Act, 1961.

One of the key changes in the new income tax law is that it does not include two different timelines, i.e., “previous year” and “assessment year.” Instead, it only includes one clear “tax year,” so that taxpayers don’t have to deal with two different timelines, which makes it easier for them to understand tax.

Under the new income tax law, even if someone files their Income Tax Return (ITR) after the deadline, they will still be able to claim a refund of the tax already deducted at source (TDS), and no penalty will be charged for doing so.

Any new tax changes for individuals, companies, Hindu Undivided Families (HUFs), or other taxpayers that are announced in the Union Budget for 2026-27 on February 1 will automatically become part of this new Income Tax Act, 2025.

However, the detailed rules are currently being prepared by the government, and it is expected that it will be officially notified after the FY27 budget.

The new income tax law was passed by Parliament on August 12, 2025, after being carefully examined by a parliamentary committee. It officially became law after receiving the president’s approval on August 21, 2025.