Nirmala Sitharaman Announces Implementation of New Income Tax Law From April 2026

New Income Tax Act: Finance Minister Nirmala Sitharaman made a significant statement during the presentation of Budget 2026. The new income tax will take effect on April 1, 2026. After adoption, exemptions can be sought by paying taxes rather than fines. Misreporting exemptions have been proposed. This includes exemptions for businesses who build data centers in India.

Furthermore, the court has the authority to transform punishments into fines. Income tax forms will be simplified. A 10% exemption may be given in addition to the applicable rate.

In November of last year, Central Board of Direct Taxes (CBDT) Chief Ravi Agarwal announced that the Income Tax Department would notify the ITR forms and rules under the simplified Income Tax Act, 2025, by January.

What is the new income tax act?

This Income Tax Act will go into effect with the new fiscal year, which begins April 1. He also added that the agency intends to simplify income tax return forms to facilitate compliance with the new law. The new law will replace the six-decade-old Income Tax Act of 1961.

The Income Tax Act 2025 will go into force in the fiscal year 2026-27 (April 1, 2026). The new Act would streamline tax regulations and remove jargon, making them more understandable. The new law does not establish new tax rates and instead streamlines the terminology, which is critical for understanding complex income tax regulations.

Also reads : Business : Understand the Secrets to Successful Enterprise.

The revised law eliminates redundant clauses and outmoded wording, reducing the number of sections from 819 to 536 and chapters from 47 to 23 in the Income Tax Act of 1961. The new law cuts the word count from 5.12 lakh to 2.6 lakh and replaces the condensed language of the 1961 statute with 39 new tables and 40 new formulas for greater clarity.

The Union Budget 2025 altered the tax rate structure to:

0-4 lakh rupees – nil.
4-8 lakh rupees -5%
8-12 lakh rupees – 10 percent
12-16 lakh rupees—15 percent
16-20 lakh rupees -20%
20-24 lakh rupees – 25%
Above 24 lakh rupees – 30%

The 2025 Budget further advanced structural tax reform by introducing a new Income Tax Bill aimed at simplifying and modernizing India’s tax structure, which streamlines numerous sections of the 1961 Act.