Finance Minister Nirmala Sitharaman has unveiled one of the most significant tax reforms in decades, announcing that the New Income Tax Act, 2025, will come into force from April 1, 2026. The move will replace India’s six-decade-old Income Tax Act and marks a major shift towards a simpler, more transparent, and digital-friendly tax system.
The announcement came during the presentation of the Union Budget 2026–27, with the government stressing that the reform focuses on ease of compliance rather than changes in tax rates.
Budget 2026: What Did FM Sitharaman Say on the New Income Tax Act?
While introducing the new law in Parliament, Sitharaman underlined the need to make tax compliance easier for ordinary citizens. “The forms have been redesigned such that ordinary citizens can comply without difficulty,” Sitharaman said.
She added that the simplified income tax rules and redesigned forms will be notified shortly, allowing taxpayers enough time to familiarise themselves with the new framework before it takes effect.
Budget 2026: No Change in Income Tax Slabs in Budget 2026
Despite expectations, the Budget did not announce any changes to income tax slabs or rates. The government maintained the tax structure introduced earlier, which had already provided relief to taxpayers under the new tax regime.
The existing tax slabs remain unchanged, continuing the framework introduced in the previous budget. This signals that the government’s priority this year is administrative reform rather than fresh rate cuts.
Budget 2026: Extended Deadline for Filing ITR
One key relief announced alongside the new Act is the extension of the deadline for filing income tax returns. The last date has now been pushed from December 31 to March 31, giving taxpayers additional time to file returns and make corrections without unnecessary pressure.
This step aims to reduce errors, improve voluntary compliance, and lower the number of disputes arising from delayed filings.
Budget 2026: What Is the New Income Tax Act of 2025?
The Income Tax Act, 2025, is designed as a revenue-neutral reform, meaning it does not increase or reduce tax rates. Instead, it focuses on clarity, simplicity, and consistency in direct tax laws.
The Act significantly trims the size and complexity of the law. The total number of sections has been reduced from 819 to 536, chapters from 47 to 23, and schedules streamlined to 16. The government has also introduced tables and formulas to make interpretation easier.
Budget 2026: Four Core Objectives of the New Tax Law
The new legislation rests on four main pillars:
1. Simplification of Tax Laws
The Act removes outdated language and repetitive provisions, replacing them with modern, easy-to-understand legal text.
2. Digital-First Compliance
The framework promotes faceless assessments and digital processes, reducing physical interaction and scope for discretion.
3. Taxpayer-Centric Approach
By improving transparency and simplifying filing, the law aims to cut litigation and make compliance smoother.
4. Global Alignment
The Act reflects modern economic realities, including taxation of digital assets and global income streams.
Budget 2026: Key Benefits for Taxpayers Under the New Act
One major change is the introduction of a single term, “Tax Year”, replacing the confusing concepts of “assessment year” and “previous year.” This simplifies timelines and reduces misunderstandings.
The law also streamlines TDS provisions, which were earlier spread across multiple sections. These are now consolidated under Section 393, making compliance easier.
Another major relief is that taxpayers can now claim TDS refunds even if returns are filed after the deadline, without facing penalties.
The Act also strengthens digital enforcement, formally defining virtual digital space and promoting technology-driven administration. In addition, it introduces a more structured, taxpayer-friendly dispute-resolution mechanism.
With these changes, the New Income Tax Act, 2025, signals a shift from complexity to clarity, placing taxpayers at the centre of India’s direct tax system.
