Income Tax Act 2025: What Changes from 1 April 2026
Why in the news
Budget 2026-27, presented by Nirmala Sitharaman, fixed 1 April 2026 for the new direct-tax law, which supersedes the six-decade-old 1961 statute and stresses simplicity, trust and fewer disputes.
Key facts
- Redraft announced in July 2024 and finished in record time.
- Plain language, logical section order, fewer cross-references; new rules and forms to follow.
- Revised and belated returns allowed till 31 March of the next year, not 31 December; fee ₹1,000 up to ₹5 lakh income, ₹5,000 above.
- Updated returns allowed even after reassessment starts, with extra tax of 10%.
- Assessment and penalty end in one common order.
| Taxpayer group | Last date |
|---|---|
| Individuals filing ITR-1 or ITR-2 | 31 July |
| Non-audit business entities and trusts | 31 August |
Penalties and prosecution
- Technical lapses without evasion intent turn into monetary fees.
- Top imprisonment cut from 7 years to 2 years; courts may convert jail into a fine.
About FAST-DS 2026
- Foreign Assets of Small Taxpayers Disclosure Scheme: a one-time six-month window from April 2026.
- Aimed at students, young professionals, tech staff and relocated NRIs.
- Covers overseas assets under ₹1 crore (certain categories) or ₹5 crore (specified cases), with immunity from prosecution.
Significance
- Trust-based administration, lighter litigation and more tax certainty.
- Protects honest taxpayers and modernises a colonial-era law.
Exam angle
- Effective date: 1 April 2026; revised-return deadline: 31 March.
- Related term: FAST-DS.