New Income Tax Act from April 1: 64-Year-Old Law Ends, Filing Taxes to Become Much Simpler

India’s income tax system is set to witness one of the biggest reforms in decades. From April 1, the Income Tax Act, 2025 will come into force across the country, officially replacing the Income Tax Act of 1961, which has governed taxation for more than 64 years. The government says the new law has been designed to make tax rules easier to understand, reduce disputes, and bring greater clarity for taxpayers.

According to official statements, the new Income Tax Act is revenue-neutral, meaning tax rates remain unchanged. The focus is not on increasing or reducing taxes, but on simplifying the structure, language, and compliance process.

Why the Old Income Tax Law Was Replaced

The Income Tax Act, 1961 was introduced at a time when India’s economy was very different. There was no digital economy, no online businesses, and far fewer sources of income. Over the years, the law was amended hundreds of times to keep pace with economic growth and changing business models.

These repeated amendments resulted in a complex web of sections, sub-sections, explanations, and provisos. For ordinary taxpayers, understanding the law became difficult, and even professionals had to rely heavily on interpretations. This complexity also led to frequent tax disputes and prolonged litigation.

To address these issues, the government decided to rewrite the law entirely instead of making more amendments to the old one.

Income Tax Act 2025: What Changes from April 1

The Income Tax Act, 2025 will be implemented from April 1, after which the old 1961 Act will cease to exist. Any tax-related changes announced in the Union Budget 2026–27 will be incorporated directly into this new law.

Key highlights of the new law include:

• Nearly 50% shorter than the old Act

• Simple and clear language

• Removal of outdated and redundant provisions

• Better structure with fewer cross-references

The government believes this will help taxpayers clearly understand their tax liabilities without confusion.

Assessment Year Removed, ‘Tax Year’ Introduced

One of the most significant changes is the removal of the confusing concepts of Assessment Year and Previous Year. Under the new system, there will be only one term — Tax Year.

This change is expected to make return filing more straightforward, especially for first-time taxpayers. It also reduces errors caused by misunderstanding the difference between financial years and assessment years.

Relief for Late ITR Filers

Another major relief under the new law is related to TDS refunds. Earlier, taxpayers who filed their Income Tax Return after the due date often faced difficulties in claiming refunds.

Under the Income Tax Act, 2025, even if a taxpayer files the return after the deadline, they will still be eligible to receive a TDS refund, without additional penalties in specific cases. This provision aims to reduce unnecessary hardship for small and salaried taxpayers.

Budget Changes to Be Fully Integrated

The government has clarified that all future tax-related amendments — whether for individuals, corporates, or HUFs — will be made directly within the framework of the new Act. This ensures consistency and avoids the confusion caused by parallel amendments and notifications.

The Income Tax Act, 2025 was approved by Parliament on 12 August 2025 and received presidential assent on 21 August 2025. Detailed rules and tax forms are currently being finalized and will be notified after the Budget.