The great tax rewrite

A sharper new income-tax law simplifies the landscape for individuals and corporations, expands the reach of enforcement authorities

- MONIKA YADAV

India has undertaken its most ambitious tax law overhaul in more than 60 years.

With the President's assent on August 21, the Income-tax Act, 2025 has been notified. It will come into force on April 1, 2026, replacing the wordy, unwieldy 1961 legislation.

Unlike the usual tinkering with rates and slabs during annual Budgets, this Act is a major rewrite, aimed at simplifying direct tax provisions, cutting redundancies, and updating enforcement powers for the digital age.

The Lok Sabha cleared the new Income-tax Bill on August 11, followed by the Rajya Sabha the next day, without any amendments. While tax rates and slab structures remain untouched, experts say the focus is firmly on clarity and simplification, and on modernising compliance.

A law in fewer words

The contrast with the old Act is stark. The 1961 law ran into 512,000 words; the new one pares that down to 259,000. Chapters have been cut from 47 to 23, while sections have reduced from 819 to 536. To improve readability and bring in more clarity, the number of tables has been expanded to 57 (from 18 earlier), and formulae to 46 (from six).

One of the clearest changes is terminological. The confusing twin concepts of "assessment year" and "previous year" have been scrapped. Instead, the new law makes "tax year", defined as the 12-month financial year beginning April, as the standard for calculating income and liability.

The new law is intended to "modernise and streamline the legal framework by simplifying language, removing redundant provisions, and reducing the number of sections," explains Amit Maheshwari, tax partner at the accountancy firm AKM Global. Corporate and slab rates have been left untouched, he adds, to ensure stability.

Consolidation of TDS, TCS