Income Tax Act, 2025: President Droupadi Murmu has given her assent to the Income Tax Act, 2025, replacing the decades-old Income Tax Act of 1961. The law will come into force from the next financial year, beginning April 1, 2026.
According to the Income Tax Department, “The Income-tax Act, 2025, has received the Hon’ble President’s assent on August 21, 2025. A landmark reform replacing the 1961 Act, it ushers in a simpler, transparent, and compliance-friendly direct tax regime.”
The new law was cleared by Parliament on August 12 and marks a major clean-up of India’s tax code, without altering tax rates.
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Simpler, leaner law for taxpayers
The Income Tax Act, 2025, aims to strip away complexity and make compliance less burdensome for taxpayers. Redundant provisions and outdated language have been removed, bringing down the number of Sections from 819 to 536 and chapters from 47 to 23. The overall word count has also been halved–from 5.12 lakh to 2.6 lakh.
For the first time, the Act incorporates 39 tables and 40 formulas to replace dense blocks of text, making the law more structured and reader-friendly.
Finance Minister Nirmala Sitharaman, while addressing Parliament, said: “These changes are not merely superficial; they reflect a new, simplified approach to tax administration. This leaner and more focused law is designed to make it easy to read, understand and implement.”
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Cutting down disputes and litigations
The central government believes this revamp will significantly reduce the scope for misinterpretation and disputes.
Explaining the rationale, Sitharaman said in the Rajya Sabha: “The largely dense and complex structure of the Income Tax Act, 1961, resulted in various interpretations, and several avoidable disputes kept mounting, not so much because of the rate, but because of the language. We were subjected to too many litigations. The density and complexity of the Act, along with the verbose way it was written over the decades, with different styles dominating, made the Act very, very tedious for anyone to use.”
The Bill was first approved by the Lok Sabha on August 11, following Sitharaman’s tabling of the revised draft that incorporated most recommendations of the Parliamentary Select Committee, chaired by BJP MP Baijayant Panda. The Rajya Sabha cleared it the next day, sending it back to the Lower House for final approval.
The Ministry of Law and Justice issued a gazette notification confirming the President’s assent on August 21, completing the process to replace the 1961 Act with a more modern and accessible law.
