The government is set to overhaul India’s tax system by replacing the six-decade-old Income Tax Act, 1961, with the Income Tax Act, 2025, starting from 1 April 2026.
The goal of the new law is to make taxation simpler, digital, and transparent.
Officials say it will reduce unnecessary tax notices, speed up refunds, and eliminate bulky paperwork.
Policymakers are calling it a “fear-free” tax system, where taxpayers can understand rules easily and avoid lengthy disputes.
Unlike the old Act, which is often seen as complex and hard to understand, the 2025 law will be drafted in plain, simple language.
Benefits for Salaried and Middle-Class Taxpayers
Middle-class taxpayers are expected to benefit under the new regime.
Income up to Rs 12 lakh per year will remain tax-free, continuing the concessions announced in the 2025 Budget.
However, the new system won’t allow deductions for insurance, housing loans, or other savings instruments.
Despite this, the combination of higher exemption limits and lower tax rates is expected to be advantageous for salaried employees.
GST and Customs Duty Reforms
The Goods and Services Tax (GST) framework, revised in September 2025, will complete its first full year in 2026.
Major rate changes are unlikely soon.
Previous reforms cut rates on about 375 goods and services, keeping most items in the 5% and 18% slabs.
The focus now is on digitisation and transparency to reduce evasion.
Customs duty is also being reformed.
The number of tariff slabs has been reduced to eight, and “faceless assessments” along with fully digital processes have been introduced.
These changes aim to ease compliance, speed up clearances, and reduce costs for importers and exporters.
Electronics, mobile phones, and some imported components could become more affordable, while taxes on tobacco, cigarettes, and pan masala are expected to remain high.
What This Means for You
Overall, India’s tax and customs reforms aim to make the system simpler, faster, and more transparent.
Digitisation and rationalisation are expected to lower costs for businesses and improve compliance, while middle-class taxpayers benefit from higher exemption limits and fewer hassles.
