The Income Tax Act, 2025, which replaces the more than 60-year-old Income Tax Act, 1961, has been formally notified by the government. It unifies and modifies the provisions of the income tax law.

The Ministry of Law and Justice announced in the gazette that the Act was ratified by the President on August 21.

Key Highlights

• The Income-tax Act, 2025 received Presidential assent on August 21 and goes into effect April 1, 2026.
• This reform modernizes India’s tax law, consolidating old provisions while introducing a simplified, digital-friendly framework.

Will the New Income Tax Act Affect Your Tax Slab?

The new simplified Act, which will take effect on April 1, 2026, merely makes the language of the income tax laws easier to understand and does not impose a new tax rate.

In addition to eliminating unnecessary clauses and outdated terminology, the new Act cuts the number of sections from 819 in the Income Tax Act of 1961 to 536 and the number of chapters from 47 to 23. The new Income Tax Act reduced the word count from 5.12 lakh to 2.6 lakh.

Changes to the Income Tax Act

"These modifications represent a new, more straightforward method of tax administration; they are not just surface-level. The purpose of this more concise and targeted law is to make it easier to read, comprehend, and apply," Finance Minister Nirmala Sitharaman had told Parliament.

On August 12, Parliament approved the new Income Tax Bill 2025. The Rajya Sabha then sent the bill back to the Lok Sabha, which had already approved it on August 11.

Also Read: Income Tax 2025: Updated Tax Returns- Who Can File, Who Can't, Key Rules

"The Income Tax Act, 1961's largely intricate and complicated structure led to different interpretations and a number of preventable disputes that continued to arise, primarily because of the language rather than the rate. There were far too many lawsuits against us." Finance Minister Sitharaman stated in the Rajya Sabha during the bill's discussion that the Act was extremely difficult for anyone to use due to its density and complexity, as well as the verbose way it was written over the decades, with various styles predominating.

Shortly after the Finance Minister introduced the amended Income Tax Bill, 2025, which included the majority of the suggestions put forth by the Parliamentary Select Committee, which was led by BJP MP Baijayant Panda, the bill was approved by the Lok Sabha on August 11.