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. The government will soon notify simplified income tax rules and tax return forms, giving taxpayers sufficient time to familiarise themselves with the new system. The Act replaces the six-decade-old 1961 law and incorporates the changes announced in the 2026-27 Budget. Sitharaman said the direct tax code was completed in record time and aims to make compliance easier for ordinary citizens.

The 2025 I-T law is revenue neutral, with no changes in tax rates, but reduces the text volume and sections by nearly 50 per cent compared with the previous law. The Act removes ambiguities, simplifies direct tax laws, and reduces scope for litigations.

Key Highlights

• Tax year: Replaces the distinction between the previous year and assessment year with a single “tax year” framework.
• TDS refunds: Taxpayers can claim TDS refunds even if income tax returns (ITRs) are filed after the deadline, without penalties.
• Revised ITR deadlines: Extended deadline for filing revised ITRs from December 31 to March 31, with a nominal fee.
• TCS rate changes: The Tax Collected at Source (TCS) rate for education and medical education under the Liberalised Remittance Scheme has been reduced from 5% to 2%, and the TCS on overseas tour packages has been cut from 5% to 2% (earlier 20%).
• Rule-based automated process for small taxpayers introduced.
• Awards given by the Motor Accident Claims Tribunal are exempt from income tax.