New I-T Act comes into effect from April 1. Here's what you need to know

New Income Tax Act, 2025

• Income-tax Act, 2025 replaces 1961 law, effective April 1, 2026.
• New law trims sections, introduces 'tax year', and simplifies compliance.
• Taxpayers urged to use CBDT mapping utility and stay updated on new rules.

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Central Board of Direct Taxes chairman Ravi Agrawal has asked the income-tax department to prepared for the rollout of the new law, urging officials to approach the transition with clarity of intent and focused execution.

The new law comes into force from April 1, marking the biggest revamp of India’s direct tax framework in over six decades.

The I-T Act, 1961 will make way for the Income-tax Act, 2025, which is aims to simplify the tax code, reduce interpretational disputes and deepen the use of technology.

The new regime is expected to significantly increase reliance on technology, tax experts say. “The Income-tax Act, 2025 is likely to usher in a more tech-driven and digitally facilitated tax administration from April 1, 2026. However, taxpayers and professionals will need to closely track the new rules, procedures and forms once they are notified,” said Kunal Savani, Partner at Cyril Amarchand Mangaldas.

From a compliance perspective, the system is expected to see reduced human intervention and a greater emphasis on data-led processes.

“The framework will rely more on expanded faceless and online mechanisms, data-driven case selection, wider use of pre-filled returns and AIS/TIS-style information statements, along with analytics to identify TDS and TCS mismatches,” said Sherry Goyal, Associate Partner at DMD Advocates.

How should taxpayers prepare for this tax season?

Taxpayers should try to understand the new provisions by making use of the CBDT mapping utility, which has been launched to help taxpayers and professionals understand and compare the old and the new tax laws.

“Till March 2026, they need to follow the old Act and complete compliance as has been going on. Post 1st April 2026, they should be mindful of any new developments/ updates, especially now that everything will be on a ‘tax year’ basis, so they should understand provisions and comply accordingly," said Ritika Nayyar, Partner, Singhania & Co.

Taxpayers should be are prompt and proactive with information, data, income and sources, as this will be the first year of introduction of the new Act.

“It is important for everyone to know something about the changes, and perhaps every assessee should ask their Lawyer or CA to prepare a note for them setting out the changes that affect them so that they can be in compliance and take whatever benefits are available,” said Anil Harish, partner, DM Harish & Co.

Income Tax Act, 2025: What changes

• The new law significantly trims the size of the income-tax statute, reducing it to 536 sections from existing 819. It rearranges provisions so that related rules are placed together instead of being scattered.

• The long-standing distinction between “previous year” and "assessment year" has been removed. A single "tax year", from April 1 to March 31, will now apply for income and taxation alike.

• All rules relating to tax deducted at source have been brought under Section 393, ending the earlier practice of spreading TDS clauses across Sections 192 to 194T.

• The Act defines Virtual Digital Assets (VDAs), including cryptocurrencies and tokenised assets.

• Several overlapping and outdated clauses have been dropped and the drafting has been simplified to make the law easier for taxpayers to read and interpret.

• The Act introduces a stronger push towards technology-based compliance, along with a more structured framework for tax recovery under Chapter XIX-D.