India to roll out New Income Tax Act in 2026, replacing six-decade-old law

The Indian government is preparing to implement the Income Tax Act 2025 from April 1, 2026, marking a major overhaul of the country’s direct tax framework and replacing the Income Tax Act that has governed taxation since 1961.

The new legislation is designed to modernise tax administration by simplifying rules, updating procedures and expanding the use of technology, while largely retaining the existing structure of income taxation.

According to officials, the revised law focuses on clearer language, streamlined compliance requirements and a stronger digital backbone for assessments, filings and communication with taxpayers. The Central Board of Direct Taxes (CBDT) is currently working on redesigning forms and procedures that will come into effect alongside the new Act.

Also read: Amazon faces class action as US court allows COVID price-gouging case to proceed

CBDT Chairman Ravi Agrawal has asked income tax officials across the country to familiarise themselves with the provisions of the new law so they can guide taxpayers during the transition. In a New Year message to department staff, Agrawal said structured training and hands-on preparation would be critical to ensuring smooth implementation.

He emphasised that officials must understand both the intent and framework of the legislation to help taxpayers navigate changes with clarity and confidence.

A key feature of the Income Tax Act 2025 is its emphasis on technology-led administration. Automated systems are expected to play a larger role in assessments, data processing and taxpayer communication, potentially altering how notices are issued and responses are handled.

Also read: Blinkit marks one year of Ambulance service in Delhi NCR, handles over 4,200 emergency cases

The tax department has also signalled a shift towards facilitation rather than enforcement, with a greater focus on voluntary compliance through initiatives such as the NUDGE framework, Non-intrusive Usage of Data to Guide and Enable taxpayers.

Taxpayers are advised to stay alert to official notifications related to new filing formats, procedures and timelines, organise financial records in anticipation of increased digital verification, and seek professional guidance where necessary.

Officials say internal training and capacity-building exercises are already underway, with the goal of ensuring that both taxpayers and the department benefit from improved transparency, efficiency and support under the new tax regime.