The Income Tax Act, 2025 came into effect from April 1, marking a comprehensive overhaul of India’s tax framework, with the Central Board of Direct Taxes (CBDT) describing it as a step towards simplified compliance and a “new chapter” in tax administration, according to PTI.The new law replaces the six-decade-old Income Tax Act of 1961, and significantly reduces the size of the legislation while retaining basic tax policy.“It represents a shift towards greater clarity and ease of compliance through simple language, simplified structure and reader-friendly presentation, without changing the underlying tax policy,” the CBDT said in a statement.“With its entry into force from April 1, 2026, the Income Tax Act, 2025 marks a new chapter in tax administration in India and an important step towards Fixit Bharat,” it added.The new framework introduces a single “tax year” system, eliminating the previous distinction between the assessment year and the previous year, with the aim of simplifying tax schedules.It also allows taxpayers to claim TDS refund even if income tax returns are filed after the deadline, without any penalty charges.The Income Tax Department said its e-filing portal will support compliance under the old and new laws during the transitional phase.
Assessments, appeals, and other proceedings related to prior years will continue under the old law until they are completed.Taxpayers who file their returns for the 2026-27 assessment year in July 2026 will continue to use the forms under the old law, while tax payments made for the 2026-27 tax year, which begins in June 2026, will be subject to the new law.The changes aim to make the tax system easier and more efficient, while maintaining continuity during the transition period, the CBDT said.