Income Tax Act 2025 – A Complete Guide to the New Tax Law
The much-anticipated Income Tax Act 2025 was introduced in Parliament on February 13, 2025. A dedicated committee is now reviewing the bill and will submit its report before the Monsoon Session. The Income Tax Act 2025 PDF has been released for public access, providing insights into the proposed reforms and changes. Let’s dive into the major highlights of the new tax framework and its impact.
Effective Date of Income Tax Act 2025
A common query among taxpayers is when the Income Tax Act 2025 will come into effect. The new law will be applicable from April 1, 2026, meaning the first financial year under this act will be FY 2026-27.
Impact on CA, CS & CMA Students
For students preparing for taxation exams, here’s the transition timeline:
Until March 31, 2026 – Exams will follow the Income Tax Act 1961.
From April 1, 2027 – Exams will be based on the Income Tax Act 2025.
Objectives of the Income Tax Act 2025
The government aims to achieve three main goals with the Income Tax Act 2025:
Modernization – Aligning tax laws with international standards.
Simplification – Using clear, concise language to reduce complexities.
Efficiency – Ensuring transparency and ease in tax calculations.
Download the Income Tax Act 2025 PDF for an in-depth understanding of all changes.
Major Highlights of the Income Tax Act 2025
1. Streamlined Tax Law Structure
The previous Income Tax Act had 298 sections but exceeded 800 provisions. The new Income Tax Act 2025 reduces this to 536 sections, removing redundant provisions.
2. Chapter Restructuring
The old law had 47 chapters, while the Income Tax Act 2025 PDF consolidates them into 23 chapters for better organization.
3. Word & Page Count Reduction
Old Act: 5.12 lakh words
New Act: 2.6 lakh words (almost 50% reduction)
Page count: 622 pages, making it 200 pages shorter than before.
4. Introduction of Tax Year
The traditional terms ‘Previous Year’ and ‘Assessment Year’ have been eliminated. Now, a single term, ‘Tax Year’, will run from April 1 to March 31. The first tax year under this change will be Tax Year 2026-27.
5. Retention of Old & New Tax Regimes
Contrary to speculation, both old and new tax regimes will continue under the Income Tax Act 2025. This provides taxpayers flexibility in choosing their preferred tax structure.
6. Inclusion of Virtual Digital Assets
Cryptocurrencies, NFTs, and other Virtual Digital Assets (VDA) are now classified as taxable assets. The law ensures undisclosed income in digital assets is accounted for.
7. Simplification of Language & Litigation Reduction
To improve clarity, the Income Tax Act 2025 PDF introduces simple language, tables, and formulas. Moreover, it incorporates previous judicial rulings, reducing tax disputes.
8. Tax Slab Structure Remains Unchanged
There are no changes in tax slabs from those announced in Union Budget 2025. With applicable rebates, the effective tax on an income of INR 12 lakh remains NIL.
9. Retention of Five Heads of Income
The Income Tax Act 2025 maintains the five income classifications:
Salary
House Property
Business/Profession
Capital Gains
Other Sources
10. Changes in Section Numbers
For better organization, section numbers have been modified:
Salary Income: Sections 15-19 (previously 15-17)
House Property: Sections 20-25 (previously 20-27)
Business/Profession: Sections 26-66 (previously 28-44)
Capital Gains: Sections 67-91 (previously 45-55)
Other Sources: Sections 92-95 (previously 56-59)
Conclusion
The Income Tax Act 2025 represents a major step toward modernizing India’s tax system. With simplified provisions, reduced litigation, and improved transparency, it aims to make tax compliance easier for individuals and businesses.
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