As the Financial Year 2026-27 begins from April 1, 2026, New Income Tax Act, 2025 will come into effect in India. With an aim to simply old tax rules, improve clarity and make compliance easier for taxpayers, the new Act will replace the Income Tax Act, 1961, which has been governing tax laws in the country for over six decades.
Some of things that will change in new tax laws will be the introduction of the ‘tax year’, detailed disclosure options in Income Tax Return (ITR) forms, and simplification of ITR filing through standardisation and technology.
Deepashree Shetty, Partner – Global Mobility Services, Tax & Regulatory Advisory, BDO India, says the new IT Act is expected to reduce ambiguity by inculcating simple language for enhanced clarity.
“Significantly lower interpretational risks could mean reduced litigation exposure for the taxpayers. Introduction of a ‘Tax Year’ concept, Virtual Digital Assets’ (VDA) in the new Act is in line with the global standards,” says Shetty.
Let’s discuss the key changes one by one and how they can benefit taxpayers in the new financial year (FY 26-27).
1. Introduction of ‘tax year’ concept
Anita Basrur – Partner at Sudit K Parekh & Co. LLP, says one of the most visible changes under the Income Tax Act, 2025 is the introduction of the ‘Tax Year’ concept, which replaces the earlier and often confusing ‘Previous Year’ and ‘Assessment Year’ framework.
Tax year aligns the year in which income is earned with the year in which it is reported and assessed, making tax compliance more intuitive for taxpayers.
2. More details available in ITR forms
Basrur explains that another key change taxpayers will experience in the New Income Tax Act, 2025, is the increased granularity in ITR filings.
“The new law and revised ITR forms require detailed disclosures for deductions such as HRA, home loan interest, and claims under Sections 80C, 80D and others, along with reconciliation of AIS and Form 26AS data. This reflects the government’s move towards data-driven compliance and scrutiny on an exception basis,” says Basrur.
3. Encouraging taxpayers to move towards new tax regime
Basrur feels the new Act continues the government’s clear policy direction of encouraging taxpayers to move towards the new tax regime, while gradually phasing out the old regime.
“The consolidation of provisions and deductions into a more structured format aims to improve readability and the ease of reference under the new law,” says Basrur.
4. Tech-enabled compliances
Shetty opines taxpayers could expect simplified tech-enabled compliances, including faceless assessments in the revamped law.
Basrur seconds Shetty’s thoughts saying, the broader intent of the new Act is simplification through standardisation and technology.
“By relying on pre-filled data and moving towards scrutiny only in exceptional cases, the government is signalling a shift towards trust-based taxation for salaried and compliant taxpayers,” Basrur feels.
5. Smoother ITR filing experience, faster processing
Basrur says while at first glance, the requirement for more detailed disclosures may appear burdensome, in the long run, it is expected to reduce mismatches, notices and repeated correspondence with the tax department.
“With most information already available through AIS and pre-filled returns, compliant taxpayers should see a smoother filing experience,” says Basrur.
Shetty feels that measures such as faster processing of tax returns, grievances, and refunds as well as reduced litigation will benefit the taxpayers.
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