SRINAGAR: Finance Minister Nirmala Sitharaman on Sunday announced that the Income Tax Act, 2025 will come into force from April 1, with the rules and income tax return forms to be notified soon.
From April 1, 2026, the new legislation will replace the six-decade-old Income Tax Act of 1961, with all tax changes proposed in the Union Budget 2026–27 to be incorporated into the revised law. Speaking in the Lok Sabha during her Budget address, Sitharaman said the direct tax code was finalised in record time.
“The Income Tax Act, 2025 will take effect from April 1, 2026. Simplified income tax rules and return forms will be notified shortly, allowing taxpayers sufficient time to familiarise themselves with the new requirements,” she said.
The Finance Minister noted that the redesigned forms aim to make compliance easier for ordinary taxpayers. She clarified that the new law is revenue neutral and does not alter existing tax rates. Instead, it seeks to simplify direct tax provisions, remove ambiguities and reduce litigation.
According to the government, the 2025 Act cuts the volume of text and number of sections by nearly 50 per cent compared with the 1961 law. It also streamlines the tax framework by eliminating the distinction between the assessment year and the previous year, introducing a single “tax year”. The new provisions further allow taxpayers to claim refunds of tax deducted at source even if income tax returns are filed after the deadline, without penalty.
