New Income Tax Act: New Income Tax to be implemented from April 1, 2026, Nirmala Sitharaman's big announcement
New Income Tax Act: New Income Tax to be implemented from April 1, 2026, Nirmala Sitharaman's big announcement
New Income Tax Act: While presenting the Budget 2026, Finance Minister Nirmala Sitharaman made a big announcement. A new income tax will now be implemented from April 1, 2026. After its implementation, taxpayers can avail exemptions by paying tax instead of penalties. There is a proposal for an exemption from incorrect reporting. It also proposes exemptions for companies setting up data centers in India.
In addition, courts can convert sentences into fines. Income tax forms will be simplified. An additional 10 percent exemption may be given in addition to the applicable rate.
Last year in November, Central Board of Direct Taxes (CBDT) chief Ravi Agarwal had said that the Income Tax Department would notify the ITR forms and rules under the simplified Income Tax Act, 2025 by January.
What is the new IT Act?
This Income Tax Act will be effective from the next financial year, starting April 1. He had also said that the department aims to keep the income tax return forms simple to ease compliance under the new law. The new law will replace the six-decade-old Income Tax Act, 1961.
The Income Tax Act 2025 will come into effect from the next financial year 2026-27 (April 1, 2026). The new act will simplify tax laws and reduce the verbosity in the law, making it easier to understand. The new law does not introduce any new tax rates and only simplifies the language, which is essential for understanding complex income tax laws.
The new law removes unnecessary provisions and archaic language and reduces the number of sections in the Income Tax Act of 1961 from 819 to 536 and the number of chapters from 47 to 23. The new law has reduced the number of words from 512,000 to 260,000, and to enhance clarity, 39 new tables and 40 new formulas have been included to replace the dense text of the 1961 law.
