New Income Tax Act: New income tax will be implemented from April 1, 2026, a big announcement by Nirmala Sitharaman
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New Income Tax Act: While presenting Budget 2026, Finance Minister Nirmala Sitharaman made a major announcement. The new income tax will now be implemented from April 1, 2026. After its implementation, exemptions can be obtained by paying taxes instead of penalties. Exemptions are proposed for misreporting. This includes exemptions for companies building data centers in India.
Furthermore, the court can convert punishments into fines. Income tax forms will be simplified. An additional 10 percent exemption may be granted beyond the applicable rate.
In November last year, Central Board of Direct Taxes (CBDT) chief Ravi Agarwal stated that the Income Tax Department would notify the ITR forms and rules under the simplified Income Tax Act, 2025, by January.
What is the New Income Tax Act?
This Income Tax Act will come into effect from the next financial year, beginning April 1. He also stated that the department aims to simplify income tax return forms to ease compliance under the new law. The new law will replace the six-decade-old Income Tax Act, 1961.
The Income Tax Act 2025 will come into effect from the next financial year, 2026-27 (April 1, 2026). The new Act will simplify tax laws and reduce jargon, making them easier to understand. The new law does not introduce any new tax rates and only simplifies the language, which is essential for understanding complex income tax laws.
The new law removes unnecessary provisions and outdated language and reduces the number of sections from 819 to 536 and the number of chapters from 47 to 23 in the Income Tax Act, 1961. The new law reduces the word count from 5.12 lakh to 2.6 lakh, and includes 39 new tables and 40 new formulas in place of the condensed text of the 1961 law to enhance clarity.
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