Argus News - Income Tax Act 2025 Takes Effect From April 1: What to Know About New Tax Year, Higher Meal Allowance, Other Updates

Bhubaneswar, Mar 31: India’s taxation system is set for a major overhaul from April 1, 2026, with the rollout of the Income Tax Act, 2025, replacing the decades-old Income Tax Act, 1961. The reform focuses on simplifying tax provisions, improving transparency, and strengthening compliance rather than increasing tax rates.

New Tax Law Replaces 1961 Framework
The new legislation aims to remove complexities embedded in the existing system and make tax compliance more streamlined. According to experts, this transition marks a structural shift towards a more modern and taxpayer-friendly framework.

‘Tax Year’ To Replace FY And AY
One of the most significant changes is the introduction of a single term -- Tax Year -- replacing the dual concepts of Financial Year (FY) and Assessment Year (AY). This move is expected to reduce confusion, particularly among new taxpayers.

Higher Meal Card Benefit For Salaried Class
The tax-free meal allowance has been increased from Rs 50 to Rs 200 per meal. This could translate into an annual tax-free benefit of up to approximately Rs 1.05 lakh, enhancing take-home efficiency for salaried individuals.

ITR Filing Simplified, Deadlines Tweaked
The government will introduce revised Income Tax Return (ITR) forms with a simplified structure and updated nomenclature. Filing deadlines for certain categories of taxpayers may also be extended up to August 31, aiming to ease compliance and reduce last-minute pressure.

PAN-Aadhaar Linkage Norms Tightened
Stricter alignment between PAN and Aadhaar data will be enforced under the new regime. Enhanced verification and documentation requirements are expected to curb discrepancies and improve data accuracy.

Lower TCS On Foreign Spending
In a relief for overseas travellers, Tax Collected at Source (TCS) on foreign spending has been reduced to a flat 2%. This will lower the upfront tax burden on international transactions.

Detailed Reporting, No Change In Tax Slabs
While tax slabs remain unchanged, the new system introduces more detailed reporting requirements, with greater emphasis on disclosures and verification to ensure transparency.

Focus On Compliance And Smart Tax Planning
Experts say the reform is more of a “system upgrade” than a tax hike. Taxpayers are advised to maintain proper documentation, choose the appropriate tax regime, and utilise benefits such as enhanced meal allowances.

By Trinath Lenka, Managing Director, Wallet4Wealth