New Income Tax Act effective April 1 | Check changes in revised ITR deadline, tax year, TCS rates

Finance Minister Nirmala Sitharaman announced that the Income Tax Act 2025 will come into force from April 1, 2026, replacing the six-decade-old Income Tax Act of 1961. The government will soon notify simplified income tax rules and redesigned tax return forms, giving taxpayers adequate time to familiarise themselves with the new system.

The new legislation incorporates the direct tax proposals announced in the Union Budget 2026–27. Sitharaman said the direct tax code was completed in record time and is designed to make tax compliance easier for ordinary citizens by simplifying language, removing ambiguities, and reducing litigation.

The 2025 income tax law is revenue-neutral, with no changes to tax rates, but reduces the volume of text and the number of sections by nearly 50 per cent compared with the 1961 law.

Key highlights: Direct taxes

• Single tax year framework: Replaces the distinction between the previous year and assessment year with a unified “tax year”, simplifying compliance and filing timelines.
• TDS refunds after deadline: Taxpayers can claim TDS refunds even if income tax returns (ITRs) are filed after the due date, without penal charges.
• Revised ITR filing deadline: Deadline for filing revised income tax returns extended from December 31 to March 31, subject to payment of a nominal fee.
• TCS rate cuts under LRS: TCS for education and medical education remittances under the Liberalised Remittance Scheme reduced from 5% to 2%. TCS on overseas tour packages cut to 2%.
• Motor Accident Claims Tribunal awards: Awards granted by the Motor Accident Claims Tribunal exempt from income tax and TDS.
• Small taxpayers: Introduction of a rule-based automated process to ease compliance for small taxpayers.
• TDS on non-resident property sales: TDS proposed on the sale of immovable property by non-residents.
• Securities Transaction Tax (STT) hike
  • STT on futures increased to 0.05% from 0.02%.
  • STT on options premium raised to 0.15% from 0.1%.
  • STT on exercise of options increased to 0.15% from 0.125%.
• Buyback taxation: Share buybacks to be taxed as capital gains for all categories of shareholders, a move aimed at protecting minority investors and curbing tax arbitrage by promoters.

Key highlights: Indirect taxes & customs duties

• Biogas blended CNG: Entire value of biogas excluded while calculating central excise duty on biogas-blended CNG.
• Critical minerals: Basic customs duty exemption on import of capital goods required for processing critical minerals in India.
• Aircraft manufacturing: Customs duty exemption on components and parts used in the manufacture of civilian, training, and other aircraft.
• Consumer electronics: Customs duty exemption on specified parts used in the manufacture of microwave ovens.
• Personal imports: Tariff rate on all dutiable goods imported for personal use reduced from 20% to 10%.
• Pharmaceuticals: Basic customs duty exempted on 17 drugs and medicines.
• Duty-free fish catch: Fish caught by Indian vessels in the Exclusive Economic Zone (EEZ) or on the high seas to be made duty-free.
• Foreign port landings: Landing of such fish at foreign ports to be treated as export of goods.
• Seafood processing inputs: Limit for duty-free imports of specified inputs used for processing seafood for export increased from 1% to 3% of the FOB value of the previous year’s export turnover.