Discover the Income Tax Act 2025, also known as the Direct Tax Code, designed to simplify and rationalize the income tax regulations in India. This portal is your go-to resource for searching, reading, and understanding interpretations of the Act for taxpayer convenience.
Important Update:
The Income Tax Bill 2025 was officially adopted on August 21, 2025, and rebranded as the Income Tax Act 2025, with an effective date of April 1, 2026.
Key Features of the Income Tax Act 2025
- Background
- Comparative Differences Between Income Tax Act 1961 and 2025
- Significant Changes in the New IT Act
- Old vs New Section Codes
- Chapters Overview
- Sections Explained
- New Schedules List
1. Background
In July 2024, Mrs. Nirmala Sitharaman, India’s Hon’ble Finance Minister, announced a comprehensive review of the Income Tax Act 1961 during Budget 2024. The goal was to craft a refined tax law that promotes compliance and broadens the tax base.
On February 12, 2025, the draft of the new Income Tax Bill 2025 was released, followed by its introduction in Lok Sabha the next day.
2. Differences: Income Tax Act 1961 vs. Income Tax Act 2025
The Income Tax Act 2025 introduces simplified language, eliminates redundant provisions, and adopts a more structured approach. Here’s a quick comparison:
| Particulars | Income Tax Act 1961 | Income Tax Act 2025 |
|---|---|---|
| Chapters | 47 | 23 |
| Sections | 298 (819 effective) | 536 |
| Schedules | 14 | 16 |
| Pages | 880 | 572 |
| Word Count | 5.12 lakhs | 2.50 lakhs |
| Provisos | 1200 | 0 |
3. New IT Act — Key Changes
1. Applicability
The Income Tax Act 2025 will be effective from April 1, 2026, applicable across all of India.
2. Tax Year Concept
Introduction of the “Tax Year” replacing the “Assessment Year” and “Previous Year” for simpler understanding.
3. Agriculture Income
No changes to the definition of agricultural income; it remains untaxed as per Schedule II of the Act.
4. Income Tax Slabs
No modifications in income tax slabs or rebates remain unchanged from the previous regime.
5. Residential Status
Residential status definitions for taxpayers remain consistent with three categories: resident, non-resident, and resident but not ordinarily resident.
6. STT Claims
The Income Tax Act 2025 clarifies that Securities Transaction Tax (STT) cannot be claimed as an expense in computing capital gains.
7. Capital Gain Account Scheme
Taxpayers must now deposit any unutilized capital gains with a designated bank authorized by the Central Government.
8. Tax Audit Signing
Only Chartered Accountants will be permitted to sign tax audit reports, eliminating prior speculation.
9. Due Dates
No changes have been made to deadlines for filing income tax returns or TDS returns, maintaining continuity from previous years.
10. Govt. Acquisition Compensation Rules
Time limits for new asset acquisition post-compulsory acquisition are counted from the date of compensation receipt.
11. Virtual Digital Asset Definition
New definitions include crypto-assets recognized as digital assets under the Act.
12. CBDT Powers
Expanded powers granted to the Central Board of Direct Taxes in procedural compliance matters.
13. TDS/TCS Provisions
Simplification achieved by merging 43 sections into a single section; TDS rates and thresholds remain unchanged.
14. Other Major Changes
Significant reductions in word counts in areas related to exemptions, TDS/TCS provisions, and non-profit organizations.
4. Old vs. New Section Codes
To assist taxpayers, refer to our comprehensive guide on Old and New Section Codes for commonly used sections in the Income Tax Act.
5. New Chapters Overview
A look at the newly structured chapters within the Income Tax Act:
| Chapter | Description | Details |
|---|---|---|
| 1 | Preliminary | Chapter I |
| 2 | Basis of Charge | Chapter II |
| 3 | Incomes Excluded | Chapter III |
| … | … | … |
6. New Sections Overview
Explore the detailed descriptions of new sections implemented in the Income Tax Act:
| Section | Description | Details |
|---|---|---|
| 1 | Short title, extent and commencement | Section-1 |
| 2 | Definitions | Section-2 |
| … | … | … |
7. New Schedule Overview
Familiarize yourself with the new schedules and their descriptions:
| Schedule | Description | Details |
|---|---|---|
| 1 | Conditions for Certain Activities | Schedule I |
| 2 | Income Not To Be Included | Schedule II |
| … | … | … |
Stay informed and navigate the Income Tax Act 2025 effectively with our comprehensive resources tailored to meet your taxation needs.