The government has passed the new Income Tax Act 2025, which will come into effect from April 1, 2026. In this, the tax rules have been made easy and clear. Digital scrutiny will be strict, so that tax evasion can be kept under strict surveillance. This will make it easier for common people to pay tax.
The Government of India has completely revamped the income tax rules. This is the first time since independence that such a major tax reform has taken place. The old income tax law that was in place since 1961 has now been abolished. The Income Tax Act, 2025 will now be implemented in its place. The President has also approved this law on 21 August 2025. This new law will come into force from 1 April 2026. The tax rates have not changed in this, but the entire system has now been made simple, clear and understandable. Now the common man will also be able to understand the tax rules, and companies will also get relief from the confusion of documents.
The old law was heavy
The 1961 law was very big and complicated. It had more than five lakh words, 819 different sections and 47 chapters. Now all these have been reduced in the new law. Now the new law contains only two and a half lakh words. The sections have been reduced to 536 and the chapters are only 23. Now more tables and formulas have been given for calculations related to tax, which has made reading and understanding the rules very easy. Another big change is that now confusing words like assessment year and previous year have been eliminated. Now everyone will adopt the same method in the name of tax year, that is, only the year from April to March will be considered in terms of tax.
TDS rules will now be straight
The rules of TDS (tax deduction) and TCS (tax collection) were spread across 71 different sections in the old law. Now these have been combined and compiled into just 11 sections. Now who has to deduct how much tax, on which income tax will be levied, who will get exemption, all this is clearly written in one place. This will not only benefit the common man, but companies will also find it easier to prepare reports. Now the scope of any mistake will be reduced.
Employees will get relief
In the new law, relief has been given to common working people as well. Earlier, if the company provided you a vehicle to commute to and from office, then only it was considered tax free. Now if the company bears the cost of your travel by taxi, bus or any other means, then that too will be exempt from tax. This is a good step according to today’s working life. Along with this, another big change is that now not only gold, silver, cash or valuables, but digital assets like bitcoin or any such thing that can earn money in future, will also be considered from the tax point of view. That is, now the definition of unknown property has also changed.
Tax officials will keep a close watch
Earlier, when tax officials used to raid, they could only check the papers and property kept in the house, shop or office. But now the law has changed. Now tax officials will be able to see digital documents as well. Be it your email, mobile, laptop, online trading account, even social media, everything has now come under the scope of investigation. The purpose of this is to catch those who are hiding their income. Now officials will be able to take action not only on your total income, but also on your hidden income.
There is also less time to correct the error
Till now, if someone made a mistake related to TDS, then he was given six years to correct it. Now this time has been reduced to two years. This will make the system faster and more transparent. Apart from this, now certificates for less or zero TDS can be obtained on more types of income. Till now this was available only on some things like rent, interest, commission, but now this facility will be available in many new cases as well. This will facilitate business people in money transactions.
Tightening rules for foreign companies
Earlier, rules have been tightened for foreign or associated companies which used to show their income here and there to save tax. Now if there is more than 26% stake in a company or if the management, money or control of a company is in the hands of another company, then it will be considered an associated company (Associated Enterprise). Earlier, it was necessary to fulfill both these conditions simultaneously, but now even one is enough. This will strengthen the government’s grip in matters like transfer pricing.
