India to Roll Out Simplified Income Tax Act from April 2026; ITR Forms Ready by January

Taxpayers in India will soon experience a major overhaul in the direct tax system as the Income Tax Act, 2025 comes into effect from April 1, 2026. Passed by Parliament on August 12, this Act replaces the six-decade-old Income Tax Act of 1961. The new law aims to simplify compliance, modernize language, remove obsolete provisions, and reduce ambiguities, while keeping existing tax rates unchanged. The Central Board of Direct Taxes (CBDT) plans to notify revised Income Tax Return (ITR) forms and rules by January, giving businesses and individuals sufficient time to adapt.

Key Highlights:

• Simplified and Taxpayer-Friendly Forms: All forms under the Income Tax Act, including ITR and quarterly TDS forms, are being redesigned to be streamlined and easy to use.
• Collaborative Effort: The Directorate of Systems is working with the Tax Policy Division to ensure that forms are clear, consistent, and practical. Once approved by the Law Ministry, they will be placed before Parliament.
• Substantial Reduction in Complexity:

• Sections reduced from 819 to 536
• Chapters reduced from 47 to 23
• Word count halved from 5.12 lakh to 2.6 lakh words.

• Improved Computation and Transparency: Dense text replaced with 39 tables and 40 formulas to simplify calculations and make compliance more transparent.
• Focus on Individuals and Small Businesses: Simplified filing formats, clearer definitions, and fewer ambiguities are expected to benefit individuals, small businesses, and financial professionals.
• Predictability and Dispute Reduction: The Act aims to standardise interpretation, reduce disputes, and make tax compliance more predictable.
• No New Taxes: The legislation does not change tax rates but focuses on simplification and modernisation.
• Early Preparation Encouraged: With revised ITR forms expected by January, financial planners and taxpayers have three months to update systems, processes, and advisory frameworks before the new financial year begins.

Conclusion:

The Income Tax Act, 2025, marks the first modernized income-tax code in over 60 years. By reducing wordiness, eliminating redundant provisions, and introducing structured tables and formulas, it promises a cleaner, lighter, and more accessible tax regime. Early preparation will be essential for smooth compliance as India transitions to this simplified and transparent framework.