Source: HT
Subject: Government Act & Bill
Context: The Union Budget 2026–27 announced that the Income Tax Act, 2025 will come into force from April 1, 2026, replacing India’s six-decade-old income tax law.
About The New Income Tax Act, 2025:
1. Implementation Timeline:
- Effective Date: The Income Tax Act, 2025, will officially come into effect from April 1, 2026.
- Record Completion: The comprehensive review of the old 1961 Act was completed in record time following its announcement in July 2024.
2. Simplification and Ease of Compliance:
- User-Friendly Design: The government is redesigning tax forms and rules to be simple enough for ordinary citizens to comply with without needing professional help.
- Acquaintance Period: Simplified rules and forms will be notified shortly to give taxpayers sufficient time to understand the new requirements.
3. Staggered Filing Deadlines:
The new Act introduces different due dates for filing returns based on the category of the taxpayer:
- ITR 1 and ITR 2: Individuals will continue to have a filing deadline of July 31.
- Non-Audit Business/Trusts: The due date for these entities has been extended to August 31.
4. Extended Revision Window:
- Filing Revised Returns: Taxpayers now have more time to correct mistakes. The deadline to file a revised or belated return is extended from December 31 to March 31 of the following year.
- Nominal Fee: A fee of ₹1,000 or ₹5,000 (depending on whether income is above or below ₹5 lakh) will apply for revisions made after December 31.
5. Updated Return Scope:
- Post-Reassessment Filing: Taxpayers can now update their returns even after reassessment proceedings have started, by paying an additional 10% tax rate over the applicable year’s rate.
6. Penalty and Prosecution Rationalization:
- Integrated Proceedings: Assessment and penalty proceedings will be finalized together through a common order to reduce litigation and multiple proceedings.
- Decriminalization: Technical defaults, such as failure to produce books of account or get accounts audited, have been decriminalized and converted into fees.
- Reduced Punishment: Maximum imprisonment for most offences is reduced to 2 years (down from 7 years), and courts are empowered to convert these into fines.
7. Special Disclosure Scheme (FAST DS):
- Foreign Asset Disclosure: A one-time 6-month window called the Foreign Assets of Small Taxpayers Disclosure Scheme (FAST DS) 2026 is introduced for individuals like students and relocated NRIs.
- Immunity: Taxpayers can disclose overseas assets/income (under ₹1 crore or ₹5 crore, depending on the category) and gain immunity from prosecution by paying specified taxes or fees.
