Background:
Indian Government formally notified the Income-tax Act, 2025 after President’s assent on August 21, 2025. The new law extends to the entire country and will come into effect from April 1, 2026.
Purpose of the Income Tax Act, 2025:
The purpose of the Indian Income Tax Act, 2025 is to make the tax system easier to understand, simpler to follow, and better suited to today’s digital economy. It replaces the old complex rules with clearer provisions, reduces confusion, and helps lower disputes. The Act aims to make tax filing more convenient through the use of technology, introduce straightforward procedures, and provide clear rules for new types of income such as digital assets. Overall, it is designed to improve compliance, protect taxpayers’ rights, and create a more efficient and modern tax system.
Old Income Tax Act V/s New Income Tax Act (2025):
Point of Difference | Income Tax Act Prior to 2025 | Income Tax Act, 2025 |
Tax Year / Assessment Year | Dual concept: “Previous Year” (income year) + “Assessment Year” (year of assessment) | Unified “Tax Year” concept, simplifying filing and assessment |
Tax Slabs | In 2024, old slabs under new regime (before 2025) were different / more aggressive at higher incomes. Note: precise 2024 slab structure depends on the regime then | From FY 2025-26, relaxed slabs as per new regime (0–4L nil, up to 24L in stepped rates, above 24L → 30%) |
Rebate under Section 87A | Rebate was lower (in previous regime) — limited relief. | Rebated raised to ₹60,000 under new regime, making income up to ₹12 lakh tax-free for certain taxpayers |
Standard Deduction | ₹50,000 standard deduction (for salaried individuals) in older regime. (As per commentary / typical deduction). | Increased to ₹75,000 under the new 2025 Act budgeting. |
TDS / TCS Provisions | Many TDS / TCS thresholds were lower; more frequent withholding; stricter non-filer penalties. | Thresholds raised, especially for interest and rent; higher-rate TDS/TCS on non-filers relaxed. |
Capital Gains / Loss Set-off | Under old regime / 1961 Act, set-off rules more restrictive (long-term loss could only be set off in limited ways). | One-time relief: LTCL (up to March 31, 2026) may be offset against STCG from FY 2026-27. |
Digital Assets / Crypto | Less explicit definitions or coverage; more ambiguity in tax treatment. | Clear definition of Virtual Digital Assets (VDA) and explicit inclusion in tax net. |
Administration | More manual, traditional assessments, more in-person / paper-based processes. | Emphasis on faceless, digital-first assessments, modern compliance mechanisms. |
Conclusion:
Income Tax Act, 2025 represents a significant step toward creating a modern, transparent, and efficient tax system that better matches India’s evolving economic landscape. By simplifying complex provisions, adopting a digital-first approach, and providing clearer rules for new forms of income, the Act aims to reduce compliance burdens and minimize disputes
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Read More at: https://incometaxindia.gov.in/Pages/acts/income-tax-act.aspx
Official Gazetee: https://egazette.gov.in/WriteReadData/2025/265620.pdf