Introduction
The President of India has given his assent to the Income Tax Bill, and now this Income Tax Act 2025 has been published in the Official Gazette. This new law will come into effect from 1 April 2026, and will replace the old Income Tax Act, 1961 (which was in operation for almost 60 years).
The main objective of this new Act is to remove outdated and redundant provisions, simplify language, and keep pace with the new economic environment and digital technology.
Key Takeaways of Income Tax Act 2025
- The concept of “tax year” has been introduced, which will eliminate the confusion of “previous year” and “assessment year”.
- All provisions have been restructured into a consolidated format. Example: All TDS sections are now in one table.
What is Income Tax Act 2025?
The Income Tax Act 2025 is a comprehensive legislation that governs the levy, administration, collection, and recovery of direct taxes in India.
Is me:
- 23 chapters
- 536 sections
- 16 schedules and a total of nearly 600+ pages are covered.
This act covers every aspect of taxation.
Income Tax Act 2025 PDF Download
The updated version of the new Income Tax Act 2025 has been published on 21 August 2025.
[Download PDF Here]
Chapters in Income Tax Act 2025
There are 23 chapters in this act, which also include some subparts. The table below gives an overview of them:
| Chapter | Overview |
| Chapter I | Preliminary |
| Chapter II | Basis of Charge |
| Chapter III | Incomes which do not form part of Total Income |
| Chapter IV | Computation of Total Income |
| Chapter V | Income of other persons included in Assessee’s Income |
| Chapter VI | Aggregation of Income |
| Chapter VII | Set-off & Carry Forward of Losses |
| Chapter VIII | Deductions in Computing Total Income |
| Chapter IX | Rebate & Reliefs |
| Chapter X | Provisions to Avoid Tax |
| Chapter XI | General Anti-Avoidance Rule |
| Chapter XII | Mode of Payment in Certain Cases |
| Chapter XIII | Determination of Tax in Special Cases |
| Chapter XIV | Tax Administration |
| Chapter XV | Return of Income |
| Chapter XVI | Procedure for Assessment |
| Chapter XVII | Special Provisions for Certain Persons |
| Chapter XVIII | Appeals, Revision & Alternate Dispute Resolution |
| Chapter XIX | Collection & Recovery of Tax |
| Chapter XX | Refunds |
| Chapter XXI | Penalties |
| Chapter XXII | Offences & Prosecution |
| Chapter XXIII | Miscellaneous |
Objectives of Income Tax Act 2025
The main objectives of the new Act are:
- Simplified tax provisions – Language and interpretation have been made easy.
- Reduced tax rates & higher rebates – Taxpayers will be left with more money → demand, savings and investments will increase.
- Dispute resolution has been simplified by removing less legal disputes – Ambiguities.
- Easy Compliance – Filing and submission have been made easy with digital compliance and simplified process.
- Virtual Digital Assets Recognition – Crypto and digital assets are included in the legal definition.
Scope of Income Tax Act 2025
The scope of tax implications depends on the residential status of the assessee:
| Income Type | Resident & Ordinarily Resident (ROR) | Resident but not ordinarily resident (RNOR) | Non-Resident (NR) |
| Income received/deemed in India | Taxable | Taxable | Taxable |
| Accrued income in India | Taxable | Taxable | Taxable |
| Income from outside India but controlled from India | Taxable | Taxable | Non-Taxable |
| Income from outside India & controlled from abroad | Taxable | Non-Taxable | Non-Taxable |
| Old foreign income remitted to India | Non-Taxable | Non-Taxable | Non-Taxable |
Key Features of Income Tax Act 2025
- Income tax is a direct tax that the taxpayer has to bear.
- The control of this taxation is with the Central Government of India.
- Broader scope for Virtual Digital Assets.
- Digital compliance and dispute resolution reforms.
- Relaxed slab rates with progressive tax system.
- Deductions are allowed up to a defined maximum limit.
Major Provisions in Income Tax Act 2025
- Introduction of Tax Year concept.
- Structured compliance and recovery mechanism.
- Special provisions for Updated Returns (Sec 267).
- Broad definition of Virtual Digital Assets (Sec 2(111)).
- Consolidation of TDS provisions.
- Covering the worldwide income of Indian taxpayers .
- Simplified capital gains taxation – short-term & long-term dono.
Treatment of Capital Gains under Act 2025
The provisions of Capital Gains have been retained but in simplified language:
- Clause 67 – Definition of Capital Gains
- Clause 196 – Short-Term Capital Gains (Equity Shares, Equity Funds, Business Trust Units)
- Clause 197 – Long-Term Capital Gains (Non-Equity Assets)
- Clause 198 – Long-Term Capital Gains (Equity Shares, Equity MFs, Business Trust Units)
Crypto & Digital Assets have now been officially defined as Capital Assets and made taxable.
Highlights of Income Tax Act 2025
- Simplified structure – 700+ sections → now 536 sections.
- The tax year has been introduced (April–March).
- TDS provisions consolidated into Sec 393.
- The definition of Virtual Digital Assets broadened.
- Simple language or redundant provisions removed.
- Effective Date – 1 April 2026.
Income Tax Slab Rates (2025)
1.New Tax Regime (Default)
| Income Slab | Tax Rate |
| Upto ₹4 Lakh | NIL |
| ₹4–8 Lakh | 5% |
| ₹8–12 Lakh | 10% |
| ₹12–16 Lakh | 15% |
| ₹16–20 Lakh | 20% |
| ₹20–24 Lakh | 25% |
| Above ₹24 Lakh | 30% |
2. Old Tax Regime (Optional)
| Income Slab | < 60 Years & NRI | 60–80 years | Above 80 Years |
| Upto ₹2.5 Lakh | NIL | NIL | NIL |
| ₹2.5–3 Lakh | 5% | NIL | NIL |
| ₹3–5 Lakh | 5% | 5% | NIL |
| ₹5–10 Lakh | 20% | 20% | 20% |
| Above ₹10 Lakh | 30% | 30% | 30% |
Rebate Limit under Income Tax Act 2025
- New Tax Regime – Income upto ₹12 Lakh → rebate upto ₹60,000.
- Old Tax Regime – Income upto ₹5 Lakh → rebate upto ₹12,500.
Income Tax Act 1961 vs 2025
- The Old Act (1961) will replace the 2025 Act.
- Sections have been simplified a lot, though the number of sections is more now.
- The most major change – the concept of tax year (will replace FY & AY).
Final Word
The Income Tax Act 2025 has tried to make the taxation system simpler, modern, and taxpayer-friendly . Now you can understand the sections and rebates and do better planning – whether it is investments, savings, or tax filing.
FAQs
Q1. What is meant by tax year under the Income Tax Act 2025?
Ans: A tax year is a 12-month period (1st April to 31st March) in which income is computed and taxed.
Q2. When will the Income Tax Act 2025 come into force?
Ans: The Act will come into force from 1 April 2026 when Parliament passes both the houses.
Q3. Are foreign dividends taxable in India?
Ans: If you are a Resident & Ordinarily Resident (ROR), then your global income including foreign dividends will be taxable.
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