Income Tax Act 2025

Why in the News? 

The President has given her assent to the Income Tax Act 2025 which replaces the Income-Tax Act, 1961. 

Key highlight of the Act

• Commencement: The Act would come into force on the 1st April 2026.
• Shorter and Simpler: New Act has simpler language and is shorter than the previous bill.
  • The provisions of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) have been separated into two sub-sections.
• Stability in Core Tax Elements
  • Tax rates and regimes for individuals and corporations remain unchanged.
  • There are no changes in offences and penalties.
  • Most definitions have also been retained. 
  • Faceless collection of information and assessment of tax cases.
• Power to Frame Schemes: The Act empowers the central government to frame new schemes for greater efficiency, transparency, and accountability.
• Undisclosed Income: The definition of undisclosed income for assessing search cases, which previously included money, bullion, jewellery, or other valuable articles, is expanded to include virtual digital assets.
• Virtual Digital Space Access: Income tax authorities are now allowed to gain access to a virtual digital space during search and seizure proceedings.
  • The authorities will have power to gain access by overriding any required access code.
  • A "virtual digital space" is defined broadly to include email servers, social media accounts, online investment and trading accounts, and websites for storing details of asset ownership.
• Dispute resolution panel: The Act allows certain eligible assessees to refer draft orders passed by assessing officers to a dispute resolution panel.  
  • These assessees include persons engaged in transfer pricing cases, non-residents, or foreign companies.
  • Transfer pricing refers to the price charged in a transaction between related entities of a multinational enterprise.
• Pending Proceedings: Any proceedings pending before any income-tax authority, Appellate Tribunal, or court on the commencement of the new Act will continue and be disposed of as if the new Act had not been enacted.
• Interpretation of tax treaties: The Act allows the central government to enter into agreements with other countries to provide relief in cases of double taxation.