India has officially intromitted into a landmark overhaul of its taxation system—Income Tax Act, 2025, replacing the one enacted in 1961 and more than 60 years old. It received Presidential assent on August 21, 2025, and shall come into force on April 1, 2026. This new act intends to make tax laws simpler, reduce litigation, and align with present-day economic realities.
Major Changes Introduced
1. Concept Of New Tax Year
The legislation introduces a new structure, replacing “Previous Year” and “Assessment Year” by one unified Tax Year to simplify compliance and reduce confusion.
2. Language & Structure Modernization
Large-scale condensation of the Act has occurred-from 800+ pages to just 622, chapters reduced to 23, and sections to 536. It has sought to eradicate redundant language, explanatory footnotes, and outdated clauses.
3. Digital Assets Recognized
For the first time ever, Virtual Digital Assets such as cryptocurrencies get a formal definition under the Statute, thereby offering clarity on an emerging investment channel.
4. TDS/TCS Correction Window Extended
Taxpayers can file corrections for TDS/TCS statements for periods up to Q3 of FY 2023–24, but only until March 31, 2026, after which error rectification will no longer be permitted.
5. Capital Loss Set-Off Rules Updated
The new bill empowers taxpayers to set off long-term capital losses (until 31st March, 2026) against short-term capital gains from FY 2026–27 and onwards, thus providing taxpayers with greater flexibility in managing their losses.
Why This Update Matters
- Simplification: The removal of such provisions that are obsolete and repetitive serves to make the law more taxpayer-friendly.
- Clarity: The VDAs and new definitions enrich the transparency for contemporary financial instruments.
- Flexibility: They make corrections and set-offs for losses possible, providing relief and accuracy in tax filings.
Also Read: Unified Pension Scheme 2025: Early Retirement Benefits For Govt Employees