A new era is going to dawn in India's tax regime. With effect from April 1, 2026, the Income-tax Act, 2025 will take effect in lieu of the Income-tax Act of 1961, which has been in force for more than 60 years. This is history's biggest tax reform, not another amendment.

The new Act is aimed at modernizing regulations, easing tax compliance, and keeping pace with India's digital economy. Everyone who is a taxpayer -- individuals, start-ups, businesses, or charitable trusts -- will be affected.

Whether you are a private taxpayer, business person, or professional responsible for the preparation of GST returns or electronic tax returns, we at Book My Accountant (BMA) are here to assist you through these changes.

The Need for a New Income Tax Act

After decades of revisions, the Income-tax Act of 1961 had grown too complicated and antiquated. It was challenging for professionals and taxpayers to understand, with over 800 sections and multiple clarifications.

Among the principal concerns were:

• Too many layers and overlapping rules make up a complex structure.
• Outdated clauses: Allusions to antiquated methods.
• High litigation: Disputes and administrative hold-ups are common.

To address this, the government unveiled the Income-tax Act, 2025, which was designed from the ground up to give taxpayers a more straightforward, streamlined, and digitally-first system.

Main Features of the New Income Tax Law

With only around 536 sections compared to 800+, the new Act is significantly shorter. A few of the main reforms are as follows:

1. The concept of the tax year

The terms "Assessment Year" and "Previous Year" are no longer interchangeable. From now on, it's just Tax Year, which is less onerous to follow.

2. Digital-First Structure

The government has turned digital in its thinking with full-fledged online notices, time-bound refunds, and faceless assessments. All steps in the compliance process are supposed to be monitored online.

3. VDAs (Virtual Digital Assets)

Cryptocurrency, NFTs, and tokenized assets are defined and taxed for the first time. The unreported holdings can be considered as unaccounted income, and VDA gains are taxable.

4. Plain Words

Heavy legalese is not used in the Act. The language used in the provisions is simpler and more understandable, easy for common taxpayers to read and understand.

5. Notice Before Enforcement

Where there are no exceptional circumstances, advance notification has to be provided by the tax department before any action for enforcement, e.g., search or seizure. This renders the process even more equitable.

6. Charitable Institution and Trust Regulations

There will be exemptions only for valid charitable purposes. There are more stringent reporting requirements and disincentives for gifts anonymously made.

Individuals' New Tax Slabs

The Act now incorporates the new tax slabs announced in the Union Budget 2025. With effect from FY 2025–2026, the following apply:

Key Points to Note

The normal deduction was raised to 75,000.

• Section 87A Rebate: Maximum ₹60,000, effectively tax-free income of ₹12 lakhs.
• Default Regime: The taxpayers can choose to go under the old regime if they want; the new regime is the default instead.
• Surcharge: Reasonable for high-income earners.

The plan here is to discourage the use of deductions and make it easier to file.

Reductions and Rewards:

The Act retains a few common deductions despite reducing exemptions:

Although the focus on the new regime is more now, 80C investments are still there.

• Health insurance (80D): Continues with additional GST exemption.
• 80JJAA (New Employee Deduction): Provides an additional 30% deduction of salaries of fresh hires to promote employment generation.
• MSMEs and start-ups: Continue to avail of relief in tax and simplified schemes.

For tax, the Unified Pension Scheme (UPS) is treated on par with the NPS.

Evaluations and Compliance:

The government is emphasizing faceless digital compliance. Some of the major changes include:

• Faceless Assessments: We will handle all cases anonymously to avoid harassment.
• 3-Year Filing Limit: We cannot file returns after three years from the due date.
• Refund Timelines: They disburse refunds earlier, with a levy of penalty for late filing.
• Enlarged Search Powers: After searching, the authorities can make use of social media and electronic devices.

Even though these steps streamline the process, they also create privacy issues, with access being in digital format.

Business Provisions:

• Corporate Tax Rates: 15% for new manufacturing facilities and 22% for domestic businesses
• Start-ups: Clarity on angel tax matters, including VDA taxation.
• International Investments: We continue to offer infrastructure exemptions to sovereign and pension funds.
• Transfer Pricing: Streamlined with quicker decisions and anonymous resolution of disputes.

Non-profits and trusts

The new Act subject’s non-profit organizations to stricter treatment:

• Anonymous donations are excluded.
• Donations from corpus must be traced out and handled appropriately.
• Expense on CSR is not allowable yet, but reporting must be simplified.

This only makes sure that legitimate non-profits are benefiting from tax relief.

Transition Rules

• FY 2025–2026 (AY 2026–2027) will be governed by the 1961 Act.
• New Act will come into operation fully on 1 April 2026.
• Until they are overtaken, current regulation and case law will continue to inform interpretation.

Tax payers and companies ought to update their data, software, and planning techniques well in advance.

Practical Consequences for Individuals

• Particularly in the default regime, return is simpler.
• The old regime may still be the choice of major investors in tax-saving products.

When dealing with Companies

• Accuracy is desirable but compliance is quicker and simpler.
• With increased transparency, there is reduced scope for manipulation.

For tax planners and certified accountants

• Both Acts need to be known side by side during the transition period.
• Educating the client will be crucial in preventing misconceptions.

Pros and Cons:

Conclusion

India's tax system has completely changed as a result of the Income-tax Act of 2025. It seeks to align with India's digital economy while making income tax easier, quicker, and more equitable.

For individuals, it means filing tax returns will be less complicated. It represents a shift for companies toward efficient, transparent, and faceless compliance. It's also time for professionals to help clients make the change.

Our goal at Book My Accountant (BMA) is to make this transition as smooth as possible. Our professionals can assist you in meeting your ITR filing deadline, staying in compliance with the new tax regime, and streamlining electronic income tax filing so you can concentrate on what really counts: expansion.

Disclaimer:

The purpose of this blog is purely to make people aware and provide information. It is not tax or legal advice. Interpretation may differ and tax law can change. Always consult a professional tax advisor before making any tax or financial decision.