NEWS

• The Central Government has formally notified the Income-Tax Act, 2025, which replaces the six-decade-old Income Tax Act, 1961.
• Passed by Parliament earlier this month, the Act received Presidential assent on August 21, 2025.
• It will come into force from April 1, 2026, with the 1961 Act continuing until March 31, 2026.

HIGHLIGHTS

Need for a New Law

• The 1961 Act had become complex and outdated due to numerous amendments.
• Vague provisions gave wide discretion to tax officials, often leading to harassment.
• The new Act aims to simplify, modernise, and rationalise income-tax law for better compliance.

Important Provisions

• Introduction of “Tax Year”: April 1 to March 31 cycle.
• Return updates allowed: up to 4 years from the relevant assessment year.
• Assessment reopening period reduced: from 10 years to 5 years.
• MAT and AMT separated into distinct sub-sections for clarity.

Digital and Privacy Concerns

• Expanded definition of “virtual digital space” includes emails, cloud servers, and social media accounts.
• Taxpayers are legally bound to provide technical assistance, including passwords.
• Officials empowered to override access codes, raising privacy concerns.
• Government argues such powers are essential in a digitised financial ecosystem.