India's direct tax system entered a new phase on Wednesday (1 April), as the Income-tax Act, 2025 officially came into force.

The legislation contains 536 sections across 23 chapters and 16 schedules, aiming to modernise the country's direct tax system, simplify compliance, and reduce litigation.

The Income Tax Department announced the rollout through a message on X, calling it a step towards a simpler and more user-friendly tax framework aligned with the vision of Viksit Bharat.

The new law replaces the decades-old Income-tax Act, 1961, marking one of the biggest overhauls in India's direct taxation system.

The Ministry of Finance announced a comprehensive overhaul of the Income-tax Act, 1961, citing the need for simplification after over six decades of amendments.

The original Income-tax Bill, 2025 was introduced in the Lok Sabha on 13 February, 2025 and referred to a Select Committee chaired by MP Baijayant Panda, which submitted over 285 recommendations, of which 32 were considered significant.

The Act, effective from 1 April, introduces a simpler structure and replaces the previous year and assessment year system with a single 'tax year'.

The legislation has reduced total sections from over 800 in the 1961 Act to 536.

The government has focused on making the language clearer and removing outdated provisions that had made compliance complicated for taxpayers over the years.

Along with the new Act, the Income Tax Rules, 2026, have also come into effect from the same date, notified by the Central Board of Direct Taxes, replacing the earlier rules and introducing changes in deduction limits, updated PAN-related requirements, and simplified reporting.

The timelines for filing income tax returns have also been revised: while the 31 July deadline remains unchanged for salaried individuals, non-audit cases such as self-employed taxpayers and professionals will now have time until 31 August to file their returns.