The Indian tax landscape is poised for a significant overhaul with the upcoming Income Tax Act, 2025, designed to broaden the tax base and simplify compliance for individuals, institutions, and charitable organizations. Principal Chief Commissioner of Income Tax (Exemption), Debjyoti Das, recently outlined the anticipated benefits of the new legislation in an interview with ANI, highlighting its focus on accessibility and clarity. This new Act, effective April 1, 2026, represents a major step towards modernizing India’s tax system.
Expanding India’s Tax Base with a Simpler System
The core objective of the new Income Tax Act is to encourage greater tax compliance by removing complexities that have historically deterred individuals and organizations. Das emphasized that the new framework is intentionally designed to draw more people into formal tax filing. He noted that while exemptions may represent a revenue loss, the ease of filing returns under the new system will likely offset this.
“As far as exemptions are concerned, even though revenue is foregone when it comes to exemptions, what I do understand is it is easier for many tax regimes to become part of this process so that they can file the return easily,” Das explained. This simplification is expected to be particularly beneficial for charitable institutions and NGOs, often burdened by intricate compliance requirements.
Key Features of the Income Tax Act, 2025
The journey to the new Act began with a comprehensive review of the outdated Income-tax Act, 1961. The resulting Income-tax Bill, 2025, underwent scrutiny by a Select Committee of Parliament, incorporating their feedback and further refining the legal language. Passed by both Houses during the monsoon session, the Act introduces several key changes:
Streamlined Terminology and Structure
One of the most significant changes is the introduction of the ‘Tax Year’ concept, replacing the previous ‘Assessment Year’ and ‘Previous Year’ terminology. This shift aims to reduce confusion and provide a more intuitive understanding of the tax cycle. Additionally, the Act consolidates and restructures existing provisions, removing obsolete sections and simplifying the overall language.
Enhanced Digital Integration & UPI Adoption
Das highlighted the accelerating shift towards digital integration as a key driver of compliance. The widespread adoption of Unified Payments Interface (UPI) is a prime example. “Use of UPI is another example, every vendor is using UPI. Things are coming into the mainstream and people want to come mainstream,” he stated. This trend suggests a growing willingness among citizens and businesses to participate in the formal economy.
Addressing Challenges in the Exemption Ecosystem
The new Income Tax Act also addresses ongoing issues within the exemption ecosystem, particularly concerning the registration of charitable and non-profit entities. Since April 2021, new organizations have benefited from automatic provisional registration, allowing them to commence operations without delay.
This approach balances facilitation with accountability. Entities registered before April 2021, undergoing automatic renewal, are now subject to revalidation. Das assured that the process would be streamlined for genuine organizations with legitimate activities. “For old trusts, if they are genuine, and there are genuine activities, it will be made as streamlined and easy for them as possible.”
Scrutinizing CSR Spending and Ensuring Accountability
While acknowledging that most companies adhere to proper procedures, Das also addressed concerns regarding Corporate Social Responsibility (CSR) spending. Instances of misuse, though not widespread, have been identified. He urged tax practitioners and corporate representatives to remain vigilant, emphasizing the importance of ensuring CSR funds are utilized as intended. This focus on accountability is crucial for maintaining the integrity of the CSR framework and maximizing its social impact. Tax compliance in this area is paramount.
A More Accessible and Understandable Tax Law
The current Income Tax Act has become “a little unwieldy” due to numerous amendments over the years, necessitating simplification. Finance Minister Nirmala Sitharaman has explicitly stated her desire for an Act that is “concise, lucid and easy to understand.” The new Act delivers on this promise.
Das described the new legislation as “very concise, beautifully written… in a flow and tabular forms are there and formulas are used.” He emphasized that the improved clarity will make navigating the tax system easier for everyone, leading to “better compliance” across all sectors. The simplification of the tax laws is a significant benefit.
In conclusion, the Income Tax Act, 2025 represents a transformative step towards a more accessible, efficient, and equitable tax system in India. By simplifying language, streamlining processes, and embracing digital integration, the new Act is expected to significantly expand the tax base and foster greater compliance. The focus on clarity and ease of understanding, coupled with enhanced accountability measures, positions India for a more robust and transparent tax future. Individuals and organizations are encouraged to familiarize themselves with the new provisions to ensure a smooth transition when the Act comes into effect on April 1, 2026.
