Salient Features of Income Tax Act 2025

Income Tax Act, 2025 – Salient Features

Salient Features of Income Tax Act,2025 :The Income Tax Act, 2025 marks a historic overhaul of India’s direct tax framework, replacing the six-decade-old Income Tax Act of 1961. Effective from April 1, 2026, this legislation aims to simplify compliance, reduce litigation, and modernize tax administration in line with global best practices. Below is a concise overview of its key features:

1. Structural Simplification

• The new Act consolidates provisions into 536 sections across 23 chapters and 16 schedules, streamlining what had become a bulky and complex law with over 800 sections in the old Act.

• Obsolete and overlapping provisions have been removed, making the law easier to interpret and apply.

2. Introduction of ‘Tax Year’

• The Act replaces the concepts of “Assessment Year” and “Previous Year” with a unified “Tax Year”, aligning terminology with international standards.

• This change simplifies understanding for taxpayers and professionals, reducing confusion in compliance.

3. Simplified Compliance

• Income Tax Returns (ITRs) have been redesigned to be more user-friendly, with clearer valuation methods for salary, perquisites, capital gains, and other income categories.

• The Act emphasizes predictable compliance by laying down formulas and definitions upfront, reducing discretionary interpretation.

4. Digital Economy & Non-Residents

• The Act introduces clear thresholds for “Significant Economic Presence”, bringing non-resident digital businesses into India’s tax net even without physical presence.

• This ensures fair taxation of global digital platforms operating in India.

5. Virtual Digital Assets (VDAs)

• Cryptocurrencies, tokenized assets, and other VDAs are explicitly defined and taxed under the new framework.

• This provides clarity in an area previously marked by uncertainty and litigation.

6. Litigation Reduction

• By consolidating definitions and procedures, the Act aims to reduce disputes between taxpayers and authorities.

• Greater tax certainty is expected to encourage compliance and improve trust in the system.

7. Policy Continuity

• While structural reforms are significant, tax rates remain largely unchanged.

• The focus is on clarity, efficiency, and modernization rather than altering the fundamental tax burden.

Conclusion:Salient Features of Income Tax Act,2025

The Income Tax Act, 2025 represents a landmark step in India’s fiscal evolution. By simplifying language, consolidating provisions, and addressing modern challenges like digital taxation and VDAs, it seeks to balance transparency, equity, and efficiency. For taxpayers, the biggest benefits lie in simpler compliance, reduced litigation, and clearer rules, making the tax system more predictable and aligned with India’s economic aspirations.

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