As India steps into Financial Year 2026-27 from April 1, 2026, a major shift in the country’s tax framework is set to take effect with the implementation of the New Income Tax Act, 2025. The new law will replace the Income Tax Act, 1961, which has governed taxation for over 60 years, with a focus on simplification, clarity, and easier compliance for taxpayers.
The updated legislation introduces several structural and procedural changes aimed at reducing confusion and improving the overall taxpayer experience. According to Deepashree Shetty, Partner – Global Mobility Services, Tax & Regulatory Advisory, BDO India, the new Act uses clearer language to help taxpayers better understand their obligations.
“Significantly lower interpretational risks could mean reduced litigation exposure for the taxpayers. Introduction of a ‘Tax Year’ concept, Virtual Digital Assets’ (VDA) in the new Act is in line with the global standards,” says Shetty.
Here are the 5 key changes taxpayers should know as the new law comes into force in FY 26-27:
- Introduction of the ‘tax year’
Anita Basrur, Partner at Sudit K Parekh & Co. LLP, says the shift to a ‘Tax Year’ is one of the most visible changes. It replaces the earlier ‘Previous Year’ and ‘Assessment Year’ system. Under the new approach, income is earned, reported, and assessed in the same year, making compliance simpler and more intuitive.
- More detailed ITR disclosures
Basrur notes that ITR forms will now require more granular disclosures. “The new law and revised ITR forms require detailed disclosures for deductions such as HRA, home loan interest, and claims under Sections 80C, 80D and others, along with reconciliation of AIS and Form 26AS data. This reflects the government’s move towards data-driven compliance and scrutiny on an exception basis,” says Basrur.
- Push towards the new tax regime
The Act continues the government’s effort to encourage taxpayers to adopt the new tax regime, while gradually moving away from the old one. “The consolidation of provisions and deductions into a more structured format aims to improve readability and the ease of reference under the new law,” Basrur adds.
- Tech-enabled compliance model
Shetty highlights simplified, technology-driven processes, including faceless assessments. Basrur adds, “By relying on pre-filled data and moving towards scrutiny only in exceptional cases, the government is signalling a shift towards trust-based taxation for salaried and compliant taxpayers.”
- Faster processing and smoother filing
While increased disclosures may seem demanding initially, Basrur believes they will reduce mismatches and tax notices over time. “With most information already available through AIS and pre-filled returns, compliant taxpayers should see a smoother filing experience,” she says. Shetty also points to faster return processing, quicker grievance handling, speedier refunds, and reduced litigation as key benefits.
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