Income Tax Act 2025 Updated Rules, Changes & Tax Provisions Explained

The Income Tax Act 2025 will come into effect from April 1, 2026, replacing the existing Income Tax Act 1961. This new tax legislation aims to eliminate redundant provisions, simplify the language, and align tax practices with the growing economic and technological domains.

The main objective of the new act is to make the tax provisions easier for everyone to understand and follow. In this blog, we will discuss the key changes, objectives, and everything related to the new act, so you don't miss anything important.

What Is The Income Tax Act of 2025?

The new Income Tax Act 2025 covers all the aspects of direct taxation in India, explained in 600 pages with 546 sections, 23 chapters, and 16 schedules to be precise. After the Indian parliament approved the new income tax bill 2025, the new act came into effect on 21 August 2025.

It serves as a revised legal framework through which the government of India will ensure fair tax administration and management nationwide.

New Income Tax Act 2025 PDF Download

You can download the updated version of the Income Tax Act, which came into effect on August 21, 2025.

Key Objective Of the Income Tax Act 2025

The following are the key objectives of the new Income Tax Act, which make this act different and better.

Clear Language & Easy Tax Provisions

Unlike the existing Income Tax Act, 1961, which has complex tax codes, the new act aims to provide a simpler tax code that makes its provisions easier to interpret, read, and apply. Meaning by just simplifying the legal wording of the tax provisions, the taxpayer can now understand their correct tax obligations without confusion.

An easy tax code also helps NRIs understand their income tax for NRIs implications and provides better provisions.

Increased Rebates And Reduced Tax Rates

Another key objective of the new act is to lower tax rates, thereby giving taxpayers in India more disposable income. With more disposable income in hand, individuals can either save or spend more, which, in turn, boosts demand for goods and services in India, supporting overall economic growth.

Less Legal Disputes & More Compliance

By eliminating broad, unclear tax provisions, streamlining the entire tax administration, and introducing modern tools and mechanisms for compliance, the New Income Tax Act is set to reduce legal disputes and provide individuals with an easier system for redressal.

Easy Compliance

The new act has a revised structure that is clearer and contains less content, making compliance more straightforward and efficient. Easier compliance will also encourage individuals to file their taxes and reduce tax evasion overall.

Simplifying Virtual Digital Asset Taxation

In the new act, the definition of virtual assets has been broadened to include other digital assets, including cryptocurrencies. This has been done to make the taxation process for virtual digital assets easier.

Features Of The Income Tax Act 2025

Key features of the new Income Tax Act 2025 are as follows:

• In India, income tax is a direct tax that cannot be transferred to another individual and must be borne by the taxpayer.
• The central government of India controls direct taxation.
• The new act expanded the scope of Virtual Digital assets.
• The new act has improved mechanisms for digital compliance and enhanced the dispute resolution system.
• The income tax slabs have been relaxed, allowing taxpayers to keep more of their disposable income.
• The new income tax act maintains a progressive tax structure, meaning individuals with higher incomes pay higher tax rates.
• In some instances, tax deductions are subject to a maximum limit per financial year.

Key Changes In the Income Tax Act 2025

Let's look at the most awaited aspect: the differences between the Income Tax Act 2025 and the Income Tax Act 1961. 

New Income Tax Act 2025 Chapters

There are 23 chapters in the new income tax act, and a few of these chapters have subparts. They are as follows.

Scope Of The Income Tax Act 2025

The scope of how the taxes will be implemented under the Income Tax Act 2025 depends entirely on the taxpayer's residency status. 

Capital Gains Tax Treatment

In the new Income Tax Act 2025, the capital gains structure and essence are retained; however, the language has been simplified and made easier to understand. The capital gains tax provisions are now covered by Clauses 67, 196, and 198 of the Income Tax Act 2025.

Additionally, please ensure that Section 47 of the Income Tax Act, 1961, has now been revised, and the clauses related to stock exchange demutualisation and the transfer of land of an industrially sick company have been eliminated from the "exceptions to transfer".

Furthermore, the new act now includes cryptocurrencies as a taxable capital class. With this inclusive move, the tax act also removes ambiguity by allowing virtual digital assets and cryptocurrencies to be treated as a taxable source of income.

The Tax Slab Rate Of Income Tax Act 2025

The tax slab rate is the rate at which a taxpayer's income is taxed. The government of India follows a progressive tax rate system, which means that as the income rises, so does the tax rate. This ensures that taxpayers with higher incomes pay higher taxes.

The Income Tax Department provides the two tax regimes in India.

• The Old Tax Regime, which is also known as the optional tax scheme.
• The New Tax Regime, which is also known as the default tax scheme.

Let us understand the old vs new tax regime slab rates

The New Tax Regime Slab Rates

Under the Income Tax Act 2025, the new tax regime slab rates are set out in section 202. The tax rates are as follows.

The Old Tax Regime Slab Rates

The old tax regime slab rates under the new Income Tax Act 2025 are as follows.

Income Tax Act 2025 Tax Rebate Limit

The tax rate limit for the new Income Tax Act 2025 is as follows.

New Tax Regime: Any taxpayer filing their tax return as per the regulation of the new income tax regime can claim a tax rebate, provided their income is not more than Rs 12 lakh; that is, you can get a tax rebate of up to Rs 60,000.

Old Tax Regime: Any taxpayer filing the tax return under the old tax regime can claim tax rebates provided their income is not more than 5 lakh, which means they can get a tax rebate of up to 12,500.

The Bottom Line

That's it. These were the key changes and highlights you, as an Indian taxpayer, must know about the new Income Tax Act 2025. Apart from the tax, you can also look at the different sections of the Income Tax Act and know about all the available deductions. This will help you make smarter investments throughout.

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We have been helping NRIs in 90+ countries file their NRI ITR in India. Our experts bring in 30+ years of experience in cross-border taxation and NRI tax implications. Our experts will provide end-to-end assistance from filing the ITR form to claiming tax deductions, exemptions, and more.

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