Income-tax Act, 2025
Why in News?
The Income-tax Act, 2025 is in the news because it officially came into force on 1 April 2026, completely replacing the six-decade-old Income-tax Act of 1961. This marks the most significant structural reform in the history of India's direct tax administration.
Key Information
- Leaner Structure: The new Act is approximately 24% shorter than its predecessor, reducing sections from 819 to 536 and chapters from 47 to 23.
- "Tax Year" Concept: It replaces the dual, often confusing terms of "Previous Year" and "Assessment Year" with a single, unified "Tax Year" (April 1 to March 31).
- Simplified Language: Archaic legal jargon has been replaced with plain English; for example, "notwithstanding" is now "irrespective".
- Digital-First Approach:
- Virtual Digital Space: For the first time, "Virtual Digital Space" (email, social media, cloud servers) is legally defined to allow authorities to investigate digital tax evasion.
- Faceless Administration: The Act grants general powers to the government to frame new schemes for fully faceless and automated tax administration.
- Consolidated Provisions: Related rules are now grouped logically. All Tax Deducted at Source (TDS) provisions, previously scattered, are now consolidated under Section 393.
- Enhanced Benefits for Individuals:
- Standard Deduction: Increased to ₹75,000 for salaried individuals under the new regime.
- Senior Citizens: The TDS threshold for interest income for seniors has been doubled from ₹50,000 to ₹1 lakh.
- Stricter NRI Compliance: Tightened reporting for foreign assets, though interest from NRE accounts remains tax-free.
- Extended Deadlines: The time limit for filing Updated Returns (ITR-U) has been extended from 2 years to 4 years.
