Union Budget 2026: ITR Filing Set to Get Simpler From April 1; What Do the New Tax Rules Mean for You?

Union Finance Minister Nirmala Sitharaman made a historic announcement for taxpayers today while presenting the Union Budget in the Lok Sabha. The old Income Tax Act that has been in force since 1961 will now become history, and from April 1, 2026, the New Income Tax Act, 2025 will come into effect across the country. While the main objective behind this move is to simplify the tax system and reduce the burden on taxpayers, there has been no change in the tax slabs or standard deduction that the middle class was expecting.

Here are five major changes under the new law:

1. New concept of ‘Tax Year’:
So far, taxpayers were often confused by the technical difference between the ‘Previous Year’ (the year in which income is earned) and the ‘Assessment Year’ (the year in which tax is paid). The new law removes this distinction and introduces a single term — ‘Tax Year’. This will make filing Income Tax Returns (ITR) much simpler.

2. Simple and clear language:
The 1961 Act was written in highly complex language, often requiring professional help to understand. The new 622-page law has been drafted in very simple language, which will reduce ordinary taxpayers’ dependence on professionals.

3. Streamlined refund process:
Even if you are unable to file your ITR on time, you will still be able to claim a TDS refund. Under the old law, penalties were imposed in such cases, but the new law provides relief to taxpayers.

4. ‘Fear-free’ tax environment:
The law focuses on reducing the number of tax notices, speeding up the refund process, and avoiding unnecessary legal complications.

5. Digital revolution:
The government has emphasized completely eliminating paper-based processes and making the entire tax system digital and transparent.

Why no change in tax slabs?
The Finance Minister clarified that the new law only changes the process of tax administration, not tax rates. Any changes in tax rates are announced every year through the Finance Act as part of the Union Budget. Since the government has not changed tax rates this year, the existing slabs will continue to apply.

Timeline of the law:

• February 13, 2025: The Bill was introduced in the Lok Sabha for the first time.

• August 11, 2025: A revised Bill was presented after incorporating certain changes.

• August 21, 2025: The Bill became law after receiving the assent of President Droupadi Murmu.

• April 1, 2026: The law will come into force.