The Impact of India’s New Income-Tax Act, 2025: Simplification, Compliance & Taxpayer Relief
The Income Tax Act, 2025, effective from 1-4-26, marks a transformative step towards a more equitable and efficient tax system in India, benefiting taxpayers, businesses, and the economy at large. For Income tax Practitioners, understanding these nuances is essential to empower clients with informed advice, streamline compliance strategies, and expand professional opportunities-whether impressing corporate bosses or generating leads through client education.
- Simplifications: Streamlining for Efficiency
| Area | Old Act (1961) | New Act (2025) |
| Sections | 819 | 536 |
| Word Count | ~5.12 lakh | ~2.60 lakh |
| Year Concepts | Previous & Assessment Years | Unified Tax Year |
| TDS/TCS Provisions | Scattered across 69 sections | Consolidated in one section with tables |
| Non-Profit Rules | Spread over multiple chapters | Single chapter with sub-parts |
| Exemptions (Sec 10) | 140 clauses with 90 explanations | 6 schedules, word count halved |
2. Key Provisions and Changes Under Income Tax Act, 2025 by Income Heads
The Act retains core computations across heads but introduces targeted clarifications, reliefs, and compliances. Below is a consolidated 10-point table summarizing key changes:-
Legends used : BPV= Income from Business/Profession/Vocation, CG= Capital Gains, IFOS= Income from other sources,
| SN | Key Point/Change | Salary | House Property | BPV | CG | IFOS |
| 1 | Unified Tax Year for Accrual | Accrues in Tax Year earned/received; clearer DTAA for NRIs. Individuals/NRIs benefit. | Applies to rental income; proportionate for co-owners. All owners. | Applies to business receipts; AMT removed for LLPs. Partnerships/LLPs. | Applies to gains realization; pre-2001 FMV option. All. | Applies to residuals like dividends; unexplained credits taxed. All. |
| 2 | Deductions/
Exemptions Increase |
Standard deduction ₹75,000 (new regime); PF contributions limits retained. Individuals. | 30% standard for let-out; pre-construction interest deductible. All. | Grouped expenses; R&D extended to 2030. Corporates/start-ups. | Rollovers for exemptions (e.g., §54 ₹10 crore cap). Individuals/trusts. | Relative gifts excluded; incidental for trusts. Individuals/trusts. |
| 3 | Enhanced Rebate/Relief | Up to ₹60,000 for ≤₹12 lakh; nil tax ≤₹12.75 lakh. Individuals only. | Interest up to ₹2 lakh for self-occupied; no notional rent. Individuals. | Start-up holiday to 2030; MTM losses deductible. Corporates. | LTCL set-off against any CG; no indexation for some. All. | Rebates apply if total income qualifies. Individuals. |
| 4 | TDS/TCS Consolidation | On salary; MACT interest ₹50,000 threshold. Corporates as deductors. | On rent thresholds increased. Corporates/individuals as payers. | Lower certificates for all payments; suspense deemed income. Partnerships/corporates. | On transfers; NR sellers 12.5%. Corporates as buyers. | On interest/dividends >₹50,000; lottery 30% flat. All payers. |
| 5 | Presumptive Schemes | N/A (handled as business cost). | N/A. | Merged: 8% business, 50% professions (₹75 lakh/₹3 crore threshold). Presumptive/individuals/partnerships. | N/A. | N/A. |
| 6 | Audit/Record Thresholds | Digital e-filing mandatory. All. | N/A unless business-linked. | Cash >₹10 crore (95% banking exempts); below presumptive needs books. Businesses/corporates. | Valuation reports amendable. All. | N/A unless unexplained. |
| 7 | Loss Set-Off/Carry Forward | N/A (salary rarely losses). | Carry forward 8 years; set-off any head. Individuals/corporates. | Broader set-off; no post-2026 restrictions. Partnerships. | LTCL 8 years; against any CG. All. | N/A (residual nature). |
| 8 | Forex/NRI Provisions | Allowed on remittances. NRIs/individuals. | N/A. | Mandatory audit under presumptive (25% profit). NRIs/foreign partnerships. | Allowed on LTCG. NRIs. | Foreign dividends DTAA relief. Corporates/trusts. |
| 9 | Digital/Faceless Compliance | E-filing for claims; refunds on belated. All. | Valuation digital; faceless assessments. All. | APIs for large taxpayers; 6-9 months appeal effect. Corporates/trusts. | Expanded search to virtual. All. | Faceless for disputes. Corporates. |
| 10 | No Clawback/Other | No reversal for perks if sold. Individuals. | N/A. | No surcharge/cess deductible. All. | Retained on exemptions for early sales. Individuals/trusts. | Stamp duty variance taxed higher. Individuals. |
Summary of Most Financially Impactful Changes Tabulated above
- Under Salary, the unified tax year, higher standard deduction (₹75,000), enhanced rebate (effective nil tax up to ₹12.75 lakh), and clearer perquisite valuation directly increase disposable income and reduce disputes.
- House Property provisions expand interest deductibility for let-out properties, permit broader loss set-off, and standardize computations—significantly benefiting leveraged real estate owners.
- In Business/Profession, removal of AMT for LLPs, merger of presumptive schemes, higher audit thresholds, and consolidated TDS/TCS rules materially lower compliance costs and effective tax outgo.
- Capital Gains see a uniform 12.5% LTCG rate, higher STCG on equities, expanded loss set-off, and tighter VDA taxation—reshaping investment strategies.
- Income from Other Sources strengthens anti-abuse rules, rationalizes TDS thresholds, and taxes unexplained credits harshly, increasing the cost of non-compliance.
3. Conclusion : Future Impact on Taxpayers & Tax Advisors
- Taxpayers : The Income Tax Act, 2025 represents a decisive shift from a litigation-heavy, interpretative tax framework to a rules-based, digitally administered regime. These reforms foster a trust-based system, potentially saving assessees 15-25% in compliance time and costs, while encouraging voluntary adherence. Importantly, the new regime meaningfully improves post-tax cash flows for individuals, start-ups, LLPs, and leveraged asset owners, while reducing the risk of retrospective adjustments and prolonged disputes.
- Tax Practitioners: The Act creates substantial professional opportunities. Clients will require structured transition advisory, impact assessment, choice-of-regime optimisation, and redesign of accounting, payroll, and compliance systems. Enhanced scrutiny of digital trails, VDAs, unexplained credits, and loss utilisation increases demand for tax audits, forensic reviews, and risk-based advisory. Simplification does not reduce relevance; instead, it shifts the practitioner’s role from form-filling to strategic tax planning, litigation prevention, training, and trusted advisory—positioning professionals as critical partners in tax governance under the 2025 framework.
By,
D. Chakraborty, F.C.A.
See Link: The Impact of India’s New Income-Tax Act, 2025: Simplification, Compliance & Taxpayer Relief
