New Income-tax Act to Come into Effect from 1 April 2025

On Friday, 22 August 2025, a new Income Tax Act was notified by the government of India, stating that at the start of the new financial year on 1 April, the over six-decade-old direct tax law will be replaced. The new bill that will replace the Income-tax Act, 1961, got President Droupadi Murmu's assent on Thursday, 21 August 2025.

In a social media post, the income tax department said, "A landmark step towards ease of compliance and doing business." According to it, the new bill is efficient, integrated and seeks to reduce lawsuits.

Baijayant Panda, chairperson of the Lok Sabha select committee that had reviewed the bill, had said in an interview that the new law will significantly reduce tax litigation, and a new India deserves a simple, easy-to-comprehend and easy-to-comply income tax law.

Also Read: What Is the Assessment Year in Income Tax?

Reforms

The new law simplifies the complexities of the existing one. The new income tax act offers tax relief to Unified Pension Scheme (UPS) subscribers on the lines given to National Pension System (NPS) subscribers. Alternative to NPS, UPS guarantees that the central government staff will get a pension equivalent to 50% of the average basic pay of the last 12 months after more than 25 years of service. The tax benefits include an exemption on a 60% lump-sum withdrawal at retirement.

The finance ministry believes that, although simplifying the law may not have an immediate or direct impact on revenue collection, it is essential to update it to include all amendments made up to 2025. Policymakers anticipate that the new law’s clear, concise and easily understandable provisions will encourage higher compliance among taxpayers.

Finance Minister Pankaj Chaudary told Parliament in March that using simple language, more tables, and mathematical formulas will help achieve the government's goal to make tax rules more transparent and easier to understand. These changes aim to simplify paying taxes and improve the overall business environment.

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