India is all set to replace the decades-old Income Tax Act, 1961 with the Income Tax Act, 2025 from 1 April 2026.
The new law aims to simplify taxes, make them fully digital, and reduce friction between taxpayers and authorities.
Officials say the updated system will minimise tax notices, speed up refunds, and reduce paperwork.
The goal is to create a “fear-free” tax environment where individuals can easily understand their obligations without getting lost in complex legal language.
What This Means for the Middle Class
The middle class is expected to benefit under the new system.
Income up to Rs 12 lakh per year will remain tax-free, continuing the relief announced in the 2025 Budget.
Unlike the older regime, the new law does not offer deductions for insurance, home loans, or savings instruments.
Still, lower tax rates and higher exemption limits are expected to make things easier for salaried taxpayers.
GST and Customs Updates
The Goods and Services Tax (GST) framework, revised in September 2025, will complete its first full year in 2026.
Major rate changes are unlikely in the near future.
Earlier reforms had cut rates on around 375 goods and services, with most falling under the 5% and 18% slabs.
The current focus is on digitisation and transparency to prevent evasion.
Customs duties are also being streamlined.
The 2025-26 Budget reduced tariff slabs to eight categories and introduced faceless digital assessments.
This is expected to ease compliance for importers and exporters, speed up clearances, and reduce costs for businesses.
Prices: What Will Change and What Will Stay
Not all prices will drop.
Products like tobacco, cigarettes, and pan masala will remain expensive due to higher taxes and cesses.
On the other hand, electronics, mobile phones, and certain imported components could become more affordable thanks to rationalised customs duties and increased digitisation.
The new tax reforms are designed to make India’s tax system simpler, faster, and more digital, benefiting both individuals and businesses while encouraging transparency and compliance.