What is the Income Tax Act, 2025?
The Income Tax Act, 2025 is a comprehensive rewrite of India's primary direct tax law — replacing the Income Tax Act, 1961, which had been in force for over 64 years. It was passed by Parliament in 2025 and comes into force on 1 April 2026.
The 1961 Act had grown to over 800 sections, more than 1,200 provisos, and an accumulated body of amendments, explanations, and sub-clauses that made it one of the most complex pieces of legislation in India. The 2025 Act is a structural simplification — the same underlying tax law, but reorganised, reworded, and renumbered to be clearer, shorter, and easier to navigate.
This means: if you receive a notice in April 2026 for your income during 2024-25, it will still cite sections of the 1961 Act. If you receive a notice for income earned after 1 April 2026, it will cite sections of the 2025 Act. Every notice guide on this platform shows both references.
The Transition: Which Act Applies When?
The most important practical question is: when you receive a notice or are in proceedings, which Act applies? The answer depends on the period under dispute, not the date you received the notice.
4 Key Structural Changes
The Income Tax Act, 2025 makes no significant change to the substantive tax rates or the categories of income. What changes is the structure, language, and procedure — with four changes that matter most for taxpayers dealing with notices.
Single "Tax Year" replaces Previous Year & Assessment Year
The dual-year system — where income earned in one year was taxed in the next — is abolished. A single Tax Year from 1st April to 31st March now governs all filing, assessment, and notice timelines. Any notice for Tax Year 2026-27 onwards will reference a "Tax Year," not an "Assessment Year."
See: Tax Year concept →536 clean sections — no provisos, no explanations
The 1961 Act had 800+ sections with 1,200+ provisos. The new Act has 536 sections with zero provisos — every exception is a sub-section or clause. All 112 definitions are consolidated in a single section. The legal basis for any notice is now easier to locate, verify, and challenge.
See: Structure of the new Act →Faceless assessment elevated to a statutory right
What previously existed only as an administrative scheme is now codified directly in the Act under Section 275. All scrutiny notices, reassessment proceedings, and appeals will be conducted through the portal. The quality and precision of your written reply matters more than ever.
New: Section 275 — Faceless AssessmentUpdated return window extended to 48 months
Under the 1961 Act, an updated return (ITR-U) could be filed within 24 months of the end of the relevant Assessment Year. The new Act extends this to 48 months from the end of the Tax Year — providing a longer structured path to voluntary compliance.
New Section 263(6) — Updated ReturnThe New Tax Year Concept
This is the single most confusing change for most taxpayers — and the most important one to understand when reading a notice.
| Concept | Income Tax Act, 1961 | Income Tax Act, 2025 |
|---|---|---|
| Income earning period | Previous Year (PY) e.g., 1 Apr 2024 – 31 Mar 2025 |
Tax Year e.g., Tax Year 2024-25 |
| Assessment/tax period | Assessment Year (AY) e.g., AY 2025-26 (the year after PY) |
Same Tax Year — no separate assessment year Tax Year 2026-27 covers both earning and assessment |
| Return filing deadline | 31 July of the Assessment Year e.g., 31 July 2025 for AY 2025-26 |
31 July of the same Tax Year e.g., 31 July 2026 for Tax Year 2026-27 |
| Notice referencing the year | "For Assessment Year 2025-26" | "For Tax Year 2026-27" |
| Section reference | Section 2(9) — Assessment Year Section 3 — Previous Year |
Section 2 — Tax Year (consolidated) Single unified concept |
Structure of the Income Tax Act, 2025
The 2025 Act is organised into 23 chapters and 536 sections, compared to the 1961 Act's approximately 820 sections. The key structural improvements are:
- Zero provisos: All 1,200+ provisos of the 1961 Act have been eliminated. Every exception, condition, or qualification is now expressed as a numbered sub-section or clause — making the law easier to read and cite.
- All 112 definitions in one place: Every defined term is consolidated in Section 2 of the new Act. Under the 1961 Act, definitions were scattered across multiple sections.
- Tables and formulae: Wherever the 1961 Act described calculations in narrative paragraphs, the 2025 Act uses structured tables and formulae — significantly reducing ambiguity in tax computation.
- Consistent cross-referencing: Each section clearly identifies related provisions, removing the need to trace amendments back through decades of Finance Acts.
Chapter Overview
Faceless Assessment — Now a Statutory Right
Under the 1961 Act, faceless assessment was an administrative scheme introduced through executive orders and notifications — it had no direct statutory backing in the Act itself. Section 144B, which provided the mechanism, was inserted later and operated through scheme documents.
The Income Tax Act, 2025 changes this fundamentally. Section 275 of the new Act gives faceless assessment direct statutory recognition — it is now a right of every taxpayer, not a scheme the government can modify or withdraw through notification.
What Does This Mean in Practice?
- All scrutiny assessments under Section 244 (new Section 143(2) equivalent) must be conducted entirely through the Income Tax portal — no in-person hearings, no physical document submissions.
- Reassessment proceedings under Sections 279–282 (equivalents of Sections 147–149) are also faceless — all notices, questionnaires, and replies through the portal.
- Every word of your reply matters more than ever. Without the ability to appear in person, explain nuances verbally, or submit physical documents in real time, the quality, completeness, and legal precision of your written response determines the outcome.
- Assessment units, verification units, technical units, and review units are all now statutory — their roles and responsibilities are defined directly in the Act.
Taxpayer's Charter — Now in the Act (Section 240)
The Taxpayer's Charter was introduced in August 2020 as a policy document by the Income Tax Department under the Transparent Taxation platform. It listed rights and obligations of taxpayers — but had no legal force. It could be ignored in proceedings without any statutory consequence.
The Income Tax Act, 2025 changes this. Section 240 gives the Taxpayer's Charter direct statutory recognition for the first time in Indian tax law. Violations of Charter rights now carry legal weight in proceedings and appeals.
Your Statutory Rights Under Section 240
- Right to fair and respectful treatment: Tax officers must treat every taxpayer with dignity and without bias. Coercive or humiliating conduct during proceedings is now a statutory violation.
- Right to a fair and impartial assessment: The Assessing Officer must consider all facts and submissions objectively. Confirmation bias — where an officer starts with a conclusion and works backwards — is prohibited.
- Right to representation through an authorised representative: You can be represented by a Chartered Accountant, advocate, or other authorised representative in all proceedings. This right cannot be denied or restricted.
- Right to complete confidentiality of information: Information you provide to the department is confidential and cannot be shared except as expressly permitted by the Act.
- Right to file a complaint about officer misconduct: A formal mechanism to raise grievances against tax officers who violate Charter rights is now embedded in the Act.
Updated Return Window: Extended to 48 Months
The updated return (ITR-U) was introduced under Section 139(8A) of the 1961 Act in the Finance Act 2022. It allowed taxpayers to voluntarily disclose income missed in their original return — paying a higher rate of tax to avoid penalties and prosecution. Under the 1961 Act, this window was 24 months from the end of the relevant Assessment Year.
Under Section 263(6) of the Income Tax Act, 2025, this window is extended to 48 months from the end of the Tax Year. This significantly expands the opportunity for voluntary compliance.
| Aspect | 1961 Act — Section 139(8A) | 2025 Act — Section 263(6) |
|---|---|---|
| Window to file | 24 months from end of AY | 48 months from end of Tax Year |
| Additional tax — Year 1 | 25% of (tax + interest) | 25% of (tax + interest) |
| Additional tax — Year 2 | 50% of (tax + interest) | 50% of (tax + interest) |
| Additional tax — Year 3 | Not available (window closes) | 60% of (tax + interest) |
| Additional tax — Year 4 | Not available | 70% of (tax + interest) |
| Bar on filing | Cannot file if search/survey conducted | Cannot file if search/survey conducted |
| Bar on filing | Cannot file if assessment completed | Cannot file if assessment completed |
Impact on Notices & Proceedings
The most immediate practical impact of the 2025 Act for taxpayers receiving notices is the change in section numbers. Every notice from Tax Year 2026-27 onwards will cite new section numbers. Here are the key notice-related changes:
| Type of Notice / Proceeding | 1961 Act Section | 2025 Act Section | Change |
|---|---|---|---|
| Defective return | 139(9) | 263(9) | Renumbered only |
| Preliminary inquiry / produce documents | 142(1) | 268(1) | Renumbered only |
| Scrutiny notice | 143(2) | 270(8) | Renumbered only |
| Assessment order after scrutiny | 143(3) | 270(10) | Renumbered only |
| Best judgment assessment | 144 | 271 | Renumbered only |
| Faceless assessment scheme | 144B | 275 | Now statutory right |
| Income escaping assessment | 147 | 279 | Renumbered only |
| Reassessment notice | 148 | 280 | Renumbered only |
| Show-cause before reassessment | 148A | 281 | Renumbered only |
| Call for information (third parties) | 133(6) | 256 | Renumbered only |
| Demand notice | 156 | 319 | Renumbered only |
| Set-off of refund against demand | 245 | 334 | Renumbered only |
| Appeal to CIT(A) | 246A | 349 | Renumbered only |
| Appeal to ITAT | 253 | 356 | Renumbered only |
| Penalty — under-reporting | 270A | 439 | Renumbered; rates same |
| Taxpayer's Charter rights | No statutory provision | 240 | NEW statutory right |
Complete Section Mapping Table
Download or view the full cross-reference of all major sections from the Income Tax Act, 1961 to the Income Tax Act, 2025 — organised by category with notes on changes.