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The new law aims to simplify tax provisions, reduce legal complexity, and make compliance easier for taxpayers and businesses. It uses simpler language and a better structure for easy understanding. Salaried individuals, professionals, startups, and companies are expected to benefit from a more modern, transparent, and digital-friendly tax system under the new Act. The new Income Tax Act 2025 is considered one of the biggest direct tax reforms in India and is expected to improve online income tax filing and overall tax compliance.

Why Did the Government Replace the Income-tax Act, 1961?

The government replaced the old Income Tax Act 1961 with the new Income Tax Act 2025 because the previous law had become complex and difficult to understand after several amendments over the years. Many taxpayers, businesses, and professionals faced confusion during income tax filing, tax planning, and compliance procedures.

The new Income Tax Act 2025 aims to simplify India’s tax system with clear language, improved structure, and digitally friendly processes. This major tax reform will help improve tax compliance, reduce legal disputes, and make filing income tax returns easier for individuals, startups, companies, and tax professionals from FY 2026-27 onwards.

The government introduced the Income Tax Act 2025 to:

✓ Simplify tax laws

✓ Reduce litigation and confusion

✓ Make tax filing easier

✓ Improve digital compliance

✓ Create transparency in tax administration

✓ Support faceless and online assessments

✓ Modernise tax provisions for the digital economy and crypto assets

The new law mainly focuses on simplification rather than increasing the tax burden and supports a more transparent taxation system in India.

How is the New Income Tax Act 2025 different from the Income Tax Act 1961?

✓ The Income Tax Act 1961 contains more than 819 sections, whereas the Income Tax Act 2025 has been simplified into 536 sections.

✓ The old Income Tax Act 1961 had 47 chapters, while the new Income Tax Act 2025 contains only 23 chapters for easier understanding.

✓ The Income Tax Act 1961 used complex legal language, whereas the Income Tax Act 2025 uses simple and easy language.

✓ The old law followed the concept of Previous Year and Assessment Year, while the new law introduces a single “Tax Year” concept.

✓ The Income Tax Act 1961 had a complex and scattered structure, whereas the Income Tax Act 2025 is more organised, simplified, and easier to understand.

✓ In the Income Tax Act 1961, TDS provisions were divided into multiple sections, whereas the Income Tax Act 2025 provides a consolidated structure.

✓ The old Income Tax Act had a limited focus on digital compliance, while the new Income Tax Act 2025 follows a digital-first framework.

✓ Faceless assessments were introduced later in the Income Tax Act 1961, whereas they are strongly integrated into the Income Tax Act 2025.

✓ Crypto taxation was added through amendments in the old Act, while the Income Tax Act 2025 properly integrates Virtual Digital Asset taxation.

✓ The Income Tax Act 1961 contained high cross-references and complex provisions, while the new Act reduced cross-references for better clarity.

✓ The Income Tax Act 1961 was difficult for common taxpayers to understand, whereas the Income Tax Act 2025 is designed to be more user-friendly and compliance-focused.

New Tax Rates under the Income Tax Act, 2025

Revised Income tax slabs are set out below, as applicable from 1 April 2026 under the new tax regime.

✓ Under the Income Tax Act 2025, income up to ₹4 lakh is fully tax-free.

✓ Income between ₹4 lakh and ₹8 lakh is taxed at 5%.

✓ Income from ₹8 lakh to ₹12 lakh is taxed at 10%.

✓ Income between ₹12 lakh and ₹16 lakh is taxed at 15%.

✓ Income from ₹16 lakh to ₹20 lakh is taxed at 20%.

✓ Income between ₹20 lakh and ₹24 lakh is taxed at 25%.

✓ Income above ₹24 lakh is taxed at 30% under the new tax regime.

New CBDT Provisions on Bank Interest TDS Under Income Tax Act 2025

The Income Tax Act 2025, effective from 1 April 2026, introduces important changes in TDS rules on bank interest. The Central Board of Direct Taxes (CBDT) has updated the provisions to simplify compliance for banks, NBFCs, and depositors. Here are the key changes explained in simple words:

1. New Section Structure

Under the new Income Tax Act 2025, the old Section 194A related to TDS on bank interest has been replaced with a revised section structure. The government has also introduced a single self-declaration form instead of separate Form 15G and Form 15H. This helps eligible depositors avoid TDS deduction if their income is below the taxable limit and simplifies bank interest TDS compliance.

2. PAN Card Requirement

Banks will not deduct TDS if the total interest earned from all branches of the same bank is up to ₹50,000 in a financial year. If the interest amount crosses this limit, TDS will be deducted at 10% when PAN details are available. However, if PAN is not provided, the bank may deduct TDS at a higher rate of 20%.

3. Strict Compliance for Banks

The Income Tax Act 2025 makes the CBDT guidelines more important for banks and financial institutions. Banks must strictly follow the updated rules, limits, and definitions related to TDS compliance and bank interest taxation. Failure to follow these provisions may lead to penalties and compliance issues.

4. Simplified Process for Depositors

The new provisions aim to make the TDS process easier and more transparent for senior citizens, fixed deposit holders, and regular bank customers. Digital compliance, online verification, and simplified documentation are expected to reduce confusion and improve taxpayer convenience.

Conclusion

The Income Tax Act 2025 brings major improvements to India’s taxation system by simplifying tax laws, enhancing digital compliance, and making TDS rules easier for taxpayers and banks to understand. The updated CBDT provisions on bank interest TDS aim to reduce confusion, improve transparency, and ensure better compliance under the new tax regime. With simplified processes, revised section structures, and stronger digital systems, the new law is expected to make taxation more user-friendly and efficient from 1 April 2026.

At Cashwave.co.in, we help individuals, businesses, startups, and professionals stay up to date with the latest provisions of the Income Tax Act 2025, income tax return filing, TDS compliance, GST registration, company registration, ROC compliance, and financial consulting services across India.