On 1 February 2025, Finance Minister Nirmala Sitharaman announced in her Union Budget speech that a new Income Tax law would be introduced soon. Following this, the Union Cabinet approved Income Tax Bill, 2025 on 7 February 2025. The Bill was then tabled in the Lok Sabha by the Finance Minister on 13 February 2025. The Income Tax Bill, 2025, was passed by Parliament on 12 August 2025.
It received assent of Hon'ble President of India on 21 August 2025, making it an Act. It came into force on 1 April 2026 as Income Tax Act, 2025, replacing Income-tax Act, 1961. In this blog post, we shall discuss new Income Tax Act, 2025 in detail.
The Income-tax Act 1961 had become bulky and complex as a result of frequent amendments it underwent over decades. It had grown to 47 chapters, 819 sections, 18 tables and 6 formulae, consisting of 512,535 words. Because of this, it had become quite complicated for taxpayers to understand and keep up with. Therefore, the Government decided to replace the old tax law with a new one and introduced Income Tax Act, 2025.
The new Act came into force on 1 April 2026. It is nearly half the size of the old law. It contains a total of 259,676 words, 23 chapters, 536 sections, 16 schedules, 57 tables and 46 formulae. The new Act has simplified the tax system for taxpayers in India by removing complicated language that was difficult to understand.
For better understanding and improved readability, it uses simpler language. It has also removed redundant and unnecessary provisions, eliminated duplication and logically reorganised sections for better clarity and easier reference.
We shall discuss the key changes under Income Tax Act 2025 herein:-
Introduction of the 'Tax Year' Concept:- The Income-Tax Act 2025, introduced a new concept called Tax Year. It replaced the earlier terms Previous Year and Assessment Year. However, the term Financial Year continues to be used.
Recognition of VDAs:- The 2025 Act officially recognizes virtual digital assets (VDAs) like cryptocurrencies and NFTs as property and capital assets.
Increase in Turnover Limit for Presumptive Taxation:- The 2025 Act has increased turnover limit for businesses eligible for presumptive taxation from earlier Rs. 2 crore to Rs. 5 crore now. For professionals, the threshold has increased from earlier Rs. 50 lakh to Rs. 75 lakh now. This makes tax compliance easier for small businesses as well as self employed individuals.
Adjustments to Capital Gains Exemptions:- The new Act has streamlined capital gains exemptions by removing outdated provisions. It has omitted the old Section 54E, which provided exemptions for capital gains arising from the transfer of assets before April 1992.
More Organised Provisions:- Under the new Act, important tax-related provisions like Tax Deducted at Source, Tax Collected at Source, exemptions and deductions have been organised more clearly using tables. Provisions relating to Non Profit Organisations have been consolidated into a single chapter instead of being spread across multiple chapters. Similarly, deductions relating to salaried individuals have been grouped under salary chapter for easier reference.
Updated Provisions for Revenue Recognition and Withholding Tax:- The new Act has simplified the provisions relating to revenue recognition for service contracts and inventory valuation. It has also reorganised the withholding tax provisions into a table and made them easier for taxpayers to understand and refer to.
The Income Tax Act 2025 keeps certain provisions of the ITA 1961 unchanged.:-
No alteration to tax rates/slab:- The 2025 Act does not change the income-tax rates or slabs to ensure stability for individuals and businesses liable to pay taxes. The new tax regime’s slabs are mentioned in tabular form. However, for the old regime tax rates, there is no table.
Continuous validity of legal definitions and court rulings:- Crucial terms and definitions that have been established during previous court rulings remain the same. This ensures consistency and accuracy in tax interpretation.
Certain deductions remain unchanged:- Certain deductions in new Act remain unchanged. This includes existing deductions for rent, life and health insurance premiums, EPF contributions and home loans.
No change in filing deadlines:- The 2025 Act did not make any changes in timelines for filing tax returns and paying taxes.
In the table below, we have provided a chapter-wise mapping of important sections under the Income Tax Act, 2025, along with their corresponding sections under the Income-tax Act, 1961:-
| Income Tax Act, 2025 | Income Tax Act, 1961 | Topic | What You Need to Know |
|---|---|---|---|
| Section 2 | Section 2 | Definitions | Definitions have been consolidated and reorganised. There are updated cross-references throughout the Act. |
| Section 3 | Section 3 | Tax Year (Replaces Previous Year) | The concepts of "Previous Year" and "Assessment Year" have been replaced by a single "Tax Year" concept. |
| Schedule II | Section 10 (Exemptions) | Exempt Incomes | Most exemptions previously covered under Section 10 have been shifted to Schedule II of the new Act. |
| Section 67 | Section 45 | Capital Gains - Charging Section | The charging provision for capital gains is now under Section 67. The related computation provisions have been reorganised under the new Act. |
| Section 123 | Section 80C | Deduction for LIC, PPF, ELSS, etc. | The deduction continues with the same Rs. 1.5 lakh limit. Only the section number has changed. |
| Section 202 | Section 115BAC | New Tax Regime | The new tax regime has been retained without changes to tax slabs. For eligible salaried taxpayers, the standard deduction of Rs. 75,000 continues to be available. |
| Section 263 | Section 139 | Return of Income | Under the new Act, return filing provisions have largely been retained and renumbered. |
| Section 392 | Section 192 | TDS on Salary | A dedicated section covers TDS on salary. Under the 2025 Act, the overall mechanism remains largely unchanged. |
| Section 393 | Sections 194A to 194T (Most TDS Provisions) | TDS on Non-Salary Payments | Multiple TDS provisions have been consolidated into a single section. There are tabular payment codes for easier reference. |
| Section 394 | Section 206C | Tax Collected at Source | TCS provisions have been consolidated under a single section to ensure improved clarity. |
| Chapter XIX | Sections 234A to 234C | Interest for Defaults | Interest provisions have been regrouped and organised more systematically under Chapter XIX. |
| Chapter XXI (Penalty Provisions) | Sections 271AAB / 271AAD | Penalties | Penalty provisions have been consolidated and reorganised while their overall intent and applicability remain largely unchanged. |
| Section 536 | No Equivalent | Repeal and Savings | A new repeal and savings provision governs the transition from the Income-tax Act, 1961, to the Income Tax Act, 2025, including the treatment of pending proceedings and existing rights. |
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The Income Tax Act 2025 maintains fundamental tax structure while offering a more transparent and simplified tax framework compared to the previous Act. By introducing the new Act, the government has made it a lot easier for individuals and businesses to comply with tax laws. The new Act has simplified the language, removed redundant provisions and restructured chapters and sections for better clarity as well as easier reference.
In case you need assistance in ITR filing, you can get in touch with our tax experts at Registrationwala.
Q1. When did the Income Tax Act, 2025 come into force?
A. It came into force on 1 April 2026 and replaced the Income-tax Act 1961.
Q2. What are Virtual Digital Assets?
A. Virtual Digital Assets are digital representations of value. Examples of Virtual Digital Assets include cryptocurrencies, such as Bitcoin and Ethereum.
Q3. Is the standard deduction on salary available under the new tax regime?
A. Yes, taxpayers under the new tax regime are eligible for a standard deduction of Rs. 75,000. This means a salaried individual earning up to Rs. 12,75,000 before the standard deduction will generally not be liable to pay income tax, subject to the applicable provisions.
Sunny Goel is a Chartered Accountant (CA) and the Senior Finance & Regulatory Consultant at Registrationwala. He has expertise in accounting, taxation, finance, regulatory compliance, and insurance compliance. He writes simple and easy-to-understand content to help businesses understand financial rules, tax laws, insurance regulations, compliance requirements, and other regulatory matters.
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