The Income-tax Act, 2025 is the charging statute of income tax in India. It contains 536 sections across 23 chapters and 16 schedules, aiming to modernise the countryâÂÂs direct tax system, simplify compliance, and reduce litigation.
The revised bill was tabled on 11 August 2025 following the withdrawal of an earlier version introduced in February 2025, and became law upon receiving Presidential assent on 21 August 2025.
Background and Timeline
The Ministry of Finance announced a comprehensive overhaul of the Income Tax Act, 1961, citing the need for simplification after over six decades of amendments.
The original Income Tax Bill, 2025 was introduced in the Lok Sabha on 13-February-2025 and referred to a Select Committee chaired by MP Baijayant Panda. The committee submitted over 285 recommendations, of which 32 were considered significant. Based on this feedback, the government withdrew the bill on 08-August-2025 and introduced a revised version three days later.
On 07-February-2026, the IT Department released the final draft rules and forms that will come into place and sought for public opinion for changes and comments if any prior to effecting the legislation.
Timeline
- 13 February 2025, Income Tax Bill, 2025 was introduced in Lok Sabha, the lower house of the Parliament of India and was sent to select committee.
- 21 July 2025: The select committee has submitted its report to the parliament.
- 8 August 2025: the Income Tax Bill, 2025 was withdrawn in Lok Sabha.
- 11 August 2025: the Income Tax (No. 02) Bill, 2025, was introduced and passed by Lok Sabha.
- 12 August 2025: the Income Tax (No. 02) Bill, 2025, was introduced and passed by Rajya Sabha.
- 21 August 2025: The Income Tax (No. 02) Bill, 2025 receives Presidential assent making it an Act.
- 1 April 2026, the Income Tax Act, 2025, came into force.
Key provisions
Major features of the Act include:
- Streamlining the tax process by replacing the complicated distinction between the âÂÂAssessment Yearâ and âÂÂPrevious Yearâ with a single, unified âÂÂTax Yearâ concept.
- Retention of a â¹12 lakh annual basic exemption limit with revised tax slabs to benefit middle-income groups.
- Reduction of total sections from over 800 in the 1961 Act to 536.
- Digital-first, faceless assessment procedures to reduce human interface and curb corruption.
- Clarification on standard deduction for house property and pre-construction interest for home loan borrowers.
- Full deduction of commuted lump-sum pension from specified pension schemes.
- Provision for faster refunds post income-tax return deadlines, and requirement for prior notice before enforcement.
- Restrictions on anonymous donations to certain religious trusts.
- The Act expands the definition of "undisclosed income", which included money, bullion, jewellery, or other valuable articles, to include virtual digital assets.
Structure overview
The Act is divided into 23 chapters covering topics from preliminary definitions to miscellaneous provisions, and includes 16 schedules on exemptions, deductions, and procedural rules.
See also
References