New Delhi, Apr 1 The Income Tax Act, 2025, which came into effect on Wednesday, marks a new chapter in India's tax administration and is an important step towards Viksit Bharat, the Central Board of Direct Taxes (CBDT) said.
The new Act replaced the six-decade-old Income Tax Act, 1961, and significantly reduced the size of the legislation.
"It marks a shift towards greater clarity and ease of compliance through simple language, a streamlined structure, and a reader-friendly presentation, without altering the underlying tax policy," the CBDT said in a statement.
With its coming into effect on April 1, 2026, the Income-Tax Act 2025 marks a new chapter in India's tax administration and an important step towards Viksit Bharat, it added.
The Income Tax department has said that its e-filing portal will facilitate compliance under both the old and income tax acts in the transition period, and all assessments, appeals, and other proceedings relating to earlier years will continue to be conducted under the old Act until their final resolution.
Taxpayers filing returns for AY2026-27 (pertaining to the period governed by the old Act) in July 2026 will do so using the forms prescribed under the old Act.
Advance tax payments for Tax Year 2026-27, commencing from June 2026, will be made in accordance with the new Act.
The Income Tax Act, 2025, simplifies the tax timeline by doing away with the distinction between the assessment year and the previous year, replacing it with a single "tax year" framework.
It also allows taxpayers to claim TDS refunds even when ITRs are filed after deadlines, without any penal charges.