Income Tax Dept issues FAQs on new Income-tax Act 2025, clarifies no new taxes

Income Tax: Last week, Finance Minister Nirmala Sitharaman launched the upgraded version of the existing e-filing portal – Income Tax Website Version 2.0 – which is set to come into effect from April 1 in line with the Income Tax Act, 2025. Now, to help taxpayers understand the transition in a better way, the I-T Department has shared a detailed set of Frequently Asked Questions (FAQs).

In a message to taxpayers, the department said the FAQs are part of its efforts to support stakeholders and ensure a smooth shift to the new tax regime. The document explains how the new law will interact with the existing framework and what changes taxpayers can expect.

"As part of its efforts to support taxpayers and stakeholders in the transition to the Income-tax Act, 2025, the Income Tax Department has released comprehensive FAQs explaining the interplay with the Income-tax Act, 1961," said the I-T Department.

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Here are some of the FAQs

Q1. What is the primary objective of replacing the Income-tax Act 1961 with the Income-tax Act, 2025?

Over the years, numerous amendments had complicated the 1961 Act. Therefore, to simplify and modernise the tax system, the new Income Tax Act, 2025, has been introduced. It should be noted that the new Act aims to present the same tax policies, but in a logical, accessible,
and a reader-friendly format, while also reducing compliance burdens.

Q2. Will the Income-tax Act, 2025, completely replace the 1961 Act?

Starting April 1, the new Income-tax Act will officially replace the previous 1961 Act. However, some transitional provisions refer to the continuation of proceedings under the old Act, said the Tax Department, citing the need to avoid disruption of pending cases and ensure smooth transition.

Q3. Is the Income Tax Act 2025 introducing new taxes or increasing tax burden?

The new Act does not introduce any new taxes or increase the burden on taxpayers. Rather, the department said that the purpose of replacing the old Act with the new one is to simplify statutory language, improve structural clarity, reduce interpretation disputes, bring the drafting style into line with modern legislative standards, and promote voluntary compliance.

Q4. How will the new Act benefit small taxpayers?

The new Act will benefit small taxpayers in several ways. One of the key changes is its readability and ease of understanding by:
• Use simpler language
• Reduce excessive cross-referencing
• Consolidate scattered provisions
• Improve digital integration

Q5. How has the volume and complexity of the legislation changed in the new Act?

The new Act has 536 sections and 16 schedules, as against 819 sections and 14 schedules in the 1961 Act. Also, the unnecessary provisions have been removed, and tables and formulas have been used in place of lengthy explanations. Similarly, the Income-tax Rules have been reduced from 511 rules with 399 forms to
333 rules with 190 forms.

Q6. Has the structure of the law been changed?

Yes. The chapters have been reorganised in a more logical manner. Provisions are now grouped better, and explanations have been merged into the main text to create a cleaner structure.

Q7. Will past tax filings or cases become invalid after the new Act comes into force?

The Income Tax Department has confirmed that no assessments or proceedings relating to previous years will be invalidated. They will remain valid. Transitional provisions ensure that previous or ongoing cases are not disrupted.

Q8. Is there any change in how income tax is charged?

Yes. The new Act replaces the term "previous year" with "tax year" and removes the concept of "assessment year."