I-T Bill 2025 gets Presidential assent, new Act to be effective from April 1, 2026

Current Context: The Income Tax Bill, 2025 received Presidential assent on August 21, 2025, officially replacing the six-decade-old Income Tax Act, 1961.

• The new legislation, titled the Income Tax Act, 2025, will come into effect from April 1, 2026, aligning with the start of the next financial year.
• Its primary objective is to simplify and modernize India’s direct tax framework, making it more transparent and taxpayer-friendly.
• Key structural reforms include a reduction in the number of Sections from 819 to 536 and Chapters from 47 to 23, along with the introduction of 39 tables and 40 formulas to enhance clarity.
• The Act replaces terms like “Assessment Year” and “Previous Year” with a unified “Tax Year” and retains existing tax rates under both old and new regimes.
• It also restores Section 80M for inter-corporate dividend deductions and allows refunds even for belated returns, correcting earlier draft limitations.
• Overall, the Act emphasizes simplified language, digital-first compliance, and reduced litigation, marking a significant shift in India’s tax administration.

Question:

Q.1 Which new unified term replaces “Assessment Year” and “Previous Year” under the Income Tax Act, 2025?
a) Financial Year
b) Tax Year
c) Return Year
d) Fiscal Year

Answer: b) “Assessment Year” and “Previous Year” created confusion; both are now replaced with “Tax Year.”