Parliament OKs 2025 Tax Bill, ends 1961 Act era

India’s Parliament has approved the Income Tax Bill, 2025, set to replace the six-decade-old Income Tax Act of 1961. The new law, designed to modernize and simplify the tax framework without changing existing rates, will come into effect on April 1, 2026, after presidential assent. It was passed in the Rajya Sabha by voice vote on Tuesday, following its swift clearance in the Lok Sabha last Monday within just three minutes, despite opposition protests.

Finance Minister Nirmala Sitharaman said the 1961 Act had become outdated after decades of amendments and increasing complexity. The new bill consolidates and streamlines provisions to suit the modern economy while retaining existing tax slabs. It reduces the number of sections and chapters, cuts the word count nearly in half, and replaces the confusing terms “assessment year” and “previous year” with the simpler “tax year,” making it easier for taxpayers to understand their obligations.