New income tax law from April 1, 2026: What changes and what doesn’t

Beginning April 1, the Income Tax Act, 2025, will come into force, replacing the six-decade-old tax law. The changes made in tax laws in the 2026-27 Budget will be incorporated into the new legislation.

Any changes regarding the taxation of individuals, corporates, HUFs, and others, as announced in the Budget for 2026-27 on February 1, will be incorporated into the new I-T Act, 2025.

What is the Simplified Income Tax Act, 2025?

Why was the Income Tax Act, 1961 reviewed and replaced?

The 1961 law was enacted 64 years ago when India’s economy, technology, and business environment were vastly different. Over time, hundreds of amendments have made the law bulky, complex, and difficult for taxpayers to understand.

With changes in how individuals earn income, how businesses operate, and the widespread use of technology, there was a need to completely overhaul the archaic framework and create a modern, simpler tax law.

What does the new Income Tax Act aim to achieve?

• Simplify direct tax laws

• Remove ambiguities and overlapping provisions

• Reduce litigation and disputed tax demands

• Make tax compliance easier for taxpayers

How is the new law simpler than the old one?

• Reduces the overall text and number of sections by about 50%

• Uses clearer and more straightforward language

• Removes obsolete provisions related to abolished taxes

• Eliminates excessive cross-referencing between sections

This makes it easier for taxpayers to understand their obligations without professional assistance.

What major structural change does the new Act introduce?

The new law introduces a single “tax year” system, replacing the confusing distinction between:

• Previous Year, and

• Assessment Year

This change simplifies compliance and understanding of timelines.

Does the new Act change tax rates or slabs?

Any changes in tax rates or slabs announced in the 2026–27 Budget will automatically be incorporated into the new Income Tax Act, 2025.

Will taxpayers be penalised for late filing under the new law?

No. Under the new Act, taxpayers can claim TDS refunds even if Income Tax Returns (ITRs) are filed after the due date, without facing penal charges for the refund claim.

What taxes does the old 1961 Act currently cover?

The Income Tax Act, 1961 includes provisions related to:

• Personal income tax

• Corporate tax

• Securities Transaction Tax (STT)

Earlier levies such as wealth tax, gift tax, and fringe benefit tax (many of which have since been abolished)

Over time, several provisions became redundant or irrelevant.

How does the new Act deal with obsolete provisions?

The Income Tax Act, 2025 removes:

• Sections related to abolished taxes

• Outdated provisions and amendments

• Redundant chapters and clauses

This results in a clean, consolidated law without legacy clutter.

When were the new law and rules approved?

The Bill was approved by Parliament on August 12, 2025

It received Presidential assent on August 21, 2025, becoming an Act

Rules to implement the Act are currently being framed and are expected to be notified after the Union Budget 2026–27

When will tax rules and return forms be notified?

Rules relating to:

Advance tax

Tax Deducted at Source (TDS)