The Government of India has officially notified the Income Tax Act, 2025, consolidating and amending the law relating to income tax. The Act, passed by both Houses of Parliament, received the President’s assent on 21st August 2025 and will come into force from 1st April 2026.
Key Highlights of the New Income Tax Act, 2025:
- Uniform Applicability – The Act extends to the whole of India.
- Consolidation of Provisions – It replaces and restructures various earlier provisions of the Income Tax Act, 1961.
- Definitions Updated – Comprehensive definitions introduced for terms like assessee, capital asset, business trust, virtual digital asset, advance tax, amalgamation, demerger, short-term and long-term capital gains.
- Digital Era Recognition – Inclusion of electronic records, cloud-based storage, and digital assets such as cryptocurrencies and NFTs under taxation scope.
- Clarity on Agricultural Income – Only genuine agricultural operations and related income are exempt; misuse through land/building rentals is restricted.
- Capital Gains Simplified – Clearer rules on classification of short-term and long-term assets, with specific timelines and inclusions/exclusions.
- Virtual Digital Assets (VDA) Taxed – Cryptocurrencies, NFTs, and other digital tokens explicitly defined and brought under the tax net.
- Residency Rules Modified – New provisions for determining tax residency of Indian citizens, NRIs, and companies based on management control and duration of stay.
- Business Structures Recognized – Explicit provisions for amalgamation, demerger, slump sale, business trusts, infrastructure funds, and co-operative banks.
- Effective from FY 2026-27 – All taxpayers, including individuals, corporates, and institutions, will be assessed under the new Act beginning 1st April 2026.
Impact:
The new Act modernizes India’s direct tax regime, brings in clarity on digital and international transactions, and aims to streamline compliance while broadening the tax base.
The Complete Act can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/08/THE-INCOME-TAX-ACT-2025.pdf
