The Income Tax Act 2025 was introduced in the previous budget to replace the age-old Income Tax Act 1961 in India. It consists of 552 sections, over 23 chapters and 16 schedules which intend to modernize the direct tax system of the country, simplify compliance and reduce litigation. It comes in effect from 1st April 2026 as announced in Budget 2026.Key HighlightsThe concept of 'Assessment Year' and 'Financial Year' has been replaced by 'Tax Year'.The act has been made technologically more consistent, including digital transactions, records and assets the relevant provisions. What is the Income Tax Act 2025?The Income Tax Act 2025 is a comprehensive legislation governing the levy, administration, collection, and recovery of direct taxes in India. The new tax provision aims to bring an income tax reform by simplifying income tax laws. The act was passed in the parliament on 21st August 2025 and will come into effect from 1st April 2025.The new act aims at simplification of tax laws, making it easier to understand, interpret and comply with.

The new Income Tax Act, 2025 is set to take effect from 01st April, 2026. The new act has significantly reduced the number of sections, streamlined the flow, and simplified the law for better reference and compliance. Through simplification of compliance, the government intends to enhance the revenue and minimize the hassle of assessments and pending cases. Direct Tax Code is a concept aimed at consolidating all the laws related to direct taxes, for easy reference, reduced litigation and better compliance. Using this concept, the new Income Tax Act 2025 was introduced, emphasizing simpler and effective compliance.What is the Direct Tax Code or New Income Tax Bill? A code is a law that consolidates, simplifies and a structured version of an act.Whenever a code is introduced by the law makers, the intent is to consolidate the vast spread sections, which is complex and confusing.The Direct Tax Code intends to simplify, streamline, and standardize the current complex Income Tax Laws for all. With the new Income Tax Act, the number of sections are reduced by 40%.There will not be any changes in the slab rates proposed in Budget 2026.Why is the Direct Tax Code being Introduced?According to the data shared by the government in 2023, only 2% of the population in India are income taxpayers .It is strikingly low in comparison to the developed economies.The simplified version of the Direct Tax Code can help in making the tax laws equitable, and transparent.An improved taxpayer base can be conducive to the economic growth of India.What are the Proposed Changes in Direct Tax Code or New Income Tax Bill?As the code aims to simplify the taxes for all, it is expected to bring in various reforms. Let’s have a look:Concept of Tax YearUsually, people outside the tax domain are confused between the financial year and the assessment year. Therefore, the concept of tax year is used in the new bill.Tax year refers to the period from 1st April to 31st March of the year.

Public Provident Fund (PPF) is a government backed savings scheme, offering guaranteed returns that are tax exempt. The interest rate remains unchanged at 7.1% per annum for Q4 FY 2025-26. With sovereign security, compound interest, and an EEE tax benefit, PPF remains one of the safest investment options for retirement and tax planning in India. Key Highlights Interest Rate: 7.1% p.a. (FY 2025–26).Investment Limits: Min Rs. 500, Max Rs.

ITR-1 (Sahaj) is the income tax return form for resident individuals with total income up to Rs. 50 lakh from salary or pension, one house property, and other sources like interest. It can also be used when you have long-term capital gains under Section 112A up to Rs, 1.25 lakh, provided there are no brought forward or carry forward capital losses.However, ITR-1 cannot be used if you have business or professional income, more than one house property, capital gains above the specified limit, foreign assets, or total income exceeding Rs. 50 lakh. In such cases, taxpayers must file other return forms such as ITR-2, ITR-3 or ITR-4.ITR-1 (Sahaj) - Key HighlightsITR-1 is meant for resident individuals onlyTotal income should not exceed Rs.

The Employees’ Provident Fund Organisation (EPFO) oversees the EPF scheme established by the EPF Act of 1952, facilitating retirement savings through joint contributions from both employer and employee. Upon retirement, employees receive a lump sum including contributions and interest, with the current EPF interest rate of 8.25% per annum.Latest UpdateEPFO may launch a mobile app from 1st April 2026, which allows the users to withdraw PF money using UPI and Aadhar authentication.This feature enables the direct credit of PF balance to the bank account of the user, enabling withdrawal process within 24 hours. What is EPF?EPF (Employees’ Provident Fund) is a government-backed retirement savings scheme where both the employer and employee contribute a fixed percentage of the employee’s basic salary to the EPF account. The contributions earn interest over time, helping employees build a retirement corpus. The accumulated amount, including both contributions and interest can be withdrawn upon retirement or under certain conditions.What is EPFO? EPFO or the Employee Provident Fund Organisation is a statutory body created by the Government of India. The administration is managed by the Central Board of Trustees (CBT), Employees’ Provident Fund.

ITR stands for Income Tax Return. It is a form through which taxpayers in India report their income, expenses, taxes paid, and tax liability for a financial year. There are seven types of ITR, namely ITR-1 to ITR-7. The type of ITR a taxpayer needs to file differs based on her income sources, level of income and the residential status. Therefore, choosing of the right ITR form becomes crucial.The ITR due date for non-tax audit cases for FY 2024-25 (AY 2025-26) is September 16, 2025.

Section 80C deductions allow taxpayers to reduce their taxable income by investing in specified instruments or making eligible payments. Under Section 80C of the Income Tax Act, individuals and HUFs can claim deductions of up to Rs. 1.5 lakh for investments such as PPF, ELSS, life insurance premiums, NSC, home loan principal repayment, and children’s tuition fees.Section 80C is one of the most widely used tax-saving provisions in India because it covers both investments and essential expenses. By strategically investing in eligible instruments, taxpayers can significantly lower their taxable income while building long-term savings.However, deductions under Section 80C are available only under the old tax regime. Taxpayers opting for the new regime cannot claim these deductions.Section 80C Deductions ListThe following investments and expenses can be claimed as Section 80C Deductions:Life insurance premium paymentsPublic Provident Fund (PPF)Employee Provident Fund (EPF) contributionsEquity Linked Savings Scheme (ELSS) mutual fundsNational Savings Certificate (NSC)Sukanya Samriddhi Yojana (SSY)5 year tax-saving fixed depositsSenior Citizen Savings Scheme (SCSS)Home loan principal repaymentStamp duty and registration charges on property purchaseTuition fees paid for up to two childrenHowever, a combined deduction of up to Rs.

Financial Year (FY) and Assessment Year (AY) are two important terms used in Income Tax, often confused among tax payers. Assessment year comes immediately after the financial year. It is the year in which tax is calculated and paid by the taxpayer. With effect from 1st April 2026, the concept of Assessment Year and Financial Year are replaced by ‘Tax Year’, as per the provisions of the Income Tax Act, 2025.This article explains in detail, the meaning of financial year and assessment year and key differences between them.What is a Financial Year?A Financial Year (FY) is the 12-month period between 1 April and 31 March – the accounting year in which you earn an income.What is the Assessment Year?The assessment year (AY) is the year that comes after the FY. Only in the assessment year, the taxes are calculated and income tax returns are filed. Both FY and AY start on 1 April and end on 31 March. For instance, for FY 2024-25, the assessment year is AY 2025-26.AY and FY for Recent YearsPeriodFinancial YearAssessment Year1 April 2025 to 31st March 20262025-262026-271 April 2024 to 31 March 20252024-252025-261 April 2023 to 31 March 20242023-242024-251 April 2022 to 31 March 20232022-232023-241 April 2021 to 31 March 20222021-222022-231 April 2020 to 31 March 20212020-212021-22What is the Difference Between AY and FY?From an income tax perspective, FY is the year in which you earn an income. AY is the year following the financial year in which you have to evaluate the previous year’s income and pay taxes on it.For instance, if your financial year is from 1 April 2024 to 31 March 2025, then it is known as FY 2024-25. The assessment year for the money earned during this period would begin after the financial year ends – that is, from 1 April 2025 to 31 March 2026.

When a resident taxpayer receives income from a foreign state, the tax will be deducted from the income of the foreign state and such taxpayer is liable for tax in the resident state. In such cases, residents can claim credit for the amount of tax deducted in the foreign state by filing Form 67 with the income tax department. Residents must submit Form 67 before the due date of Income Tax Returns (ITR) filing to claim credit for such taxes. Form 67 is also required to be furnished in case the carry backward of losses of the current year results in the refund of foreign tax for which credit has been claimed in any previous years.As per the provisions of the new Income Tax Rules 2026, Form 67 has been replaced by Form 44.What is Foreign Tax Credit (FTC)?Assume a scenario where a taxpayer is a tax resident of Country A (Residence State) and receives income from Country B (Source State). The Source State withholds a portion of taxes on the income received by the taxpayer in that country. Further, the Residence State, according to its tax laws, would tax the taxpayer on his worldwide income, which would include income from the Source State too.This would result in the taxpayer being taxed on his income twice, i.e.

In a situation where your total income includes any past dues paid in the current year, you may be worried about paying a higher tax on such arrears. However, the Income Tax Act provides relief under Section 89(1) on such salary arrears to reduce the taxpayer's burden.Relief under Section 89(1)Tax is calculated on your total income earned or received during the year. If your total income includes any past dues paid in the current year, you may be worried about paying a higher tax on such arrears.To save you from any additional tax burden due to delay in receiving income, the tax laws allow a relief under section 89(1). In simple words, you do not pay more taxes if there was a delay in payment to you and you were in a lower tax bracket for the year you received the money.An employee must meet certain conditions to claim relief under this section. To start with, Section 89 reliefs can be claimed on any of the following received during a particular year: a) Salary received in arrears or in advance b) Premature withdrawal from Provident Fund c) Gratuity d) Commuted value of pension e) Arrears of family pension f) Compensation on termination of employmentHow to Calculate Tax Relief under Section 89(1) on Salary Arrears?If in case of receipt of past salary, salary in advance or receipt of family pension in arrears, you are allowed some tax relief under section 89(1).Here’s how you can calculate the tax relief yourself –Step 1: Calculate tax payable on the total income, including additional salary – in the year it is received.