Income Tax Act 2025: Highlights, Slab Rates & Provisions

LegalDev , Last updated: 25 August 2025
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Introduction

The President of India has given his assent to the Income Tax Bill, and now this Income Tax Act 2025 has been published in the Official Gazette. This new law will come into effect from 1 April 2026, and will replace the old Income Tax Act, 1961 (which was in operation for almost 60 years).

The main objective of this new Act is to remove outdated and redundant provisions, simplify language, and keep pace with the new economic environment and digital technology.

Income Tax Act 2025: Highlights, Slab Rates and Provisions

Key Takeaways of Income Tax Act 2025

The concept of "tax year" has been introduced, which will eliminate the confusion of "previous year" and "assessment year".
All provisions have been restructured into a consolidated format. Example: All TDS sections are now in one table.

What is the Income Tax Act 2025?

The Income Tax Act 2025 is a comprehensive legislation that governs the levy, administration, collection, and recovery of direct taxes in India.

It consists of:

23 chapters
536 sections
16 schedules and a total of nearly 600+ pages are covered.

This act covers every aspect of taxation.

Income Tax Act 2025 PDF Download

The updated version of the new Income Tax Act 2025 was published on 21 August 2025. [Download PDF Here]

Chapters in Income Tax Act 2025

There are 23 chapters in this act, which also include some subparts. The table below gives an overview of them:

Chapter	Overview
Chapter I	Preliminary
Chapter II	Basis of Charge
Chapter III	Incomes which do not form part of Total Income
Chapter IV	Computation of Total Income
Chapter V	Income of other persons included in Assessee's Income
Chapter VI	Aggregation of Income
Chapter VII	Set-off & Carry Forward of Losses
Chapter VIII	Deductions in Computing Total Income
Chapter IX	Rebate & Reliefs
Chapter X	Provisions to Avoid Tax
Chapter XI	General Anti-Avoidance Rule
Chapter XII	Mode of Payment in Certain Cases
Chapter XIII	Determination of Tax in Special Cases
Chapter XIV	Tax Administration
Chapter XV	Return of Income
Chapter XVI	Procedure for Assessment
Chapter XVII	Special Provisions for Certain Persons
Chapter XVIII	Appeals, Revision & Alternate Dispute Resolution
Chapter XIX	Collection & Recovery of Tax
Chapter XX	Refunds
Chapter XXI	Penalties
Chapter XXII	Offences & Prosecution
Chapter XXIII	Miscellaneous

Objectives of the Income Tax Act 2025

The main objectives of the new Act are:

Simplified tax provisions - Language and interpretation have been made easy.
Reduced tax rates & higher rebates - Taxpayers will be left with more money → demand, savings and investments will increase.
Dispute resolution has been simplified by removing less legal disputes - Ambiguities.
Easy Compliance - Filing and submission have been made easy with digital compliance and simplified process.
Virtual Digital Assets Recognition - Crypto and digital assets are included in the legal definition.

Scope of Income Tax Act 2025

The scope of tax implications depends on the residential status of the assessee:

Income Type	Resident & Ordinarily Resident (ROR)	Resident but not ordinarily resident (RNOR)	Non-Resident (NR)
Income received/deemed in India	Taxable	Taxable	Taxable
Accrued income in India	Taxable	Taxable	Taxable
Income from outside India but controlled from India	Taxable	Taxable	Non-Taxable
Income from outside India & controlled from abroad	Taxable	Non-Taxable	Non-Taxable
Old foreign income remitted to India	Non-Taxable	Non-Taxable	Non-Taxable

Key Features of Income Tax Act 2025

Income tax is a direct tax that the taxpayer has to bear.
The control of this taxation is with the Central Government of India.
Broader scope for Virtual Digital Assets.
Digital compliance and dispute resolution reforms.
Relaxed slab rates with progressive tax system.
Deductions are allowed up to a defined maximum limit.

Major Provisions in Income Tax Act 2025

Introduction of Tax Year concept.
Structured compliance and recovery mechanism.
Special provisions for Updated Returns (Sec 267).
Broad definition of Virtual Digital Assets (Sec 2(111)).
Consolidation of TDS provisions.
Covering the worldwide income of Indian taxpayers.
Simplified capital gains taxation - short-term & long-term dono.

Treatment of Capital Gains under Act 2025

The provisions of Capital Gains have been retained but in simplified language:

Clause 67 - Definition of Capital Gains
Clause 196 - Short-Term Capital Gains (Equity Shares, Equity Funds, Business Trust Units)
Clause 197 - Long-Term Capital Gains (Non-Equity Assets)
Clause 198 - Long-Term Capital Gains (Equity Shares, Equity MFs, Business Trust Units)

Crypto & Digital Assets have now been officially defined as Capital Assets and made taxable.

Highlights of Income Tax Act 2025

Simplified structure - 700+ sections → now 536 sections.
The tax year has been introduced (April-March).
TDS provisions consolidated into Sec 393.
The definition of Virtual Digital Assets broadened.
Simple language or redundant provisions removed.
Effective Date - 1 April 2026.

Income Tax Slab Rates (2025)

1. New Tax Regime (Default)

Income Slab	Tax Rate
Upto ₹4 Lakh	NIL
₹4-8 Lakh	5%
₹8-12 Lakh	10%
₹12-16 Lakh	15%
₹16-20 Lakh	20%
₹20-24 Lakh	25%
Above ₹24 Lakh	30%

2. Old Tax Regime (Optional)

Income Slab	< 60 Years & NRI	60-80 years	Above 80 Years
Upto ₹2.5 Lakh	NIL	NIL	NIL
₹2.5-3 Lakh	5%	NIL	NIL
₹3-5 Lakh	5%	5%	NIL
₹5-10 Lakh	20%	20%	20%
Above ₹10 Lakh	30%	30%	30%

Rebate Limit under Income Tax Act 2025

New Tax Regime - Income upto ₹12 Lakh → rebate upto ₹60,000.
Old Tax Regime - Income upto ₹5 Lakh → rebate upto ₹12,500.

Income Tax Act 1961 vs 2025

The Old Act (1961) will replace the 2025 Act.
Sections have been simplified a lot, though the number of sections is more now.
The most major change - the concept of tax year (will replace FY & AY).

Final Word

The Income Tax Act 2025 has tried to make the taxation system simpler, modern, and taxpayer-friendly . Now you can understand the sections and rebates and do better planning - whether it is investments, savings, or tax filing.