income tax law
New Income Tax Act: A big chapter is going to be added in the tax history of India. The Central Government has now decided to register the 64 year old ‘Income Tax Act 1961’ in the pages of history. A completely new, modern and simple income tax law will be implemented in the country from April 1, 2026. The government clearly believes that the complexities of the old law had confused the common taxpayer, and now the time has come to change them. This new change is going to have a direct impact on your pocket, your investment habits and the way of filing returns. Transparency has been emphasized in the new law, but some rules have also been made strict. Let us understand what are those big changes which will affect the life of the common man.
Big change in tax calendar
While paying income tax, the biggest confusion was regarding the mathematics of years. Common taxpayers often get confused between ‘Previous Year’ (year in which income was earned) and ‘Assessment Year’ (year in which tax was paid). This terminology was quite complex in the old law of 1961.
The new law has provided a permanent solution to this problem. Now the same system of ‘Tax Year’ will be applicable. This simply means that whatever you earn between April 1 and March 31, its calculation and tax filing will be considered within the same year. This will make the process of tax calculation very simple and flat, so that even first-time tax payers will not have to completely depend on a Chartered Accountant (CA).
Will tax evasion be caught through Instagram posts?
For some time, there was a strong discussion whether the tax department will now digitally peep into people’s bedrooms and holidays? Will the authorities keep an eye on your WhatsApp chats and Instagram reels? The situation regarding this has been clarified in the new law. It is true that in the new Act, tax officials have been given the power to collect digital evidence, but its scope is limited.
This provision is only for those cases where there is suspicion of ‘serious tax evasion’ i.e. huge tax evasion. No officer can search the social media account or private messages of any common citizen without any solid basis or search warrant. For this the department will have to go through a prescribed legal process. That means, if you are an honest taxpayer, then you have nothing to fear about your social media activity.
TDS money will not be lost even on late return
This change is no less than good news for employed and middle class families. According to the old rules, if for any reason you were not able to file your Income Tax Return (ITR) by July 31 (or the due date), you would have lost your right to a refund. The money of your hard work used to go to the government treasury.
The new Income Tax Act has changed this strict rule. Now even if you file ‘belated return’ i.e. late ITR, you will still be able to claim your TDS refund. However, to maintain discipline, the government has made a provision for late fees. Those with income less than Rs 5 lakh will have to pay a fine of Rs 1,000 and those with income above Rs 5,000. Even if you pay the fine, your huge refund will now be saved from getting lost.
Shock to those investing in gold bonds
Till now Sovereign Gold Bond (SGB) was considered the best means of tax saving and safe investment, but the new rules have dulled its shine a bit. According to the new Act, if you buy Sovereign Gold Bond from the stock market (secondary market), you will now have to pay tax on the profits earned from it.
According to the rules, tax at the rate of 12.5% will be charged on such profits. Earlier this category was considered completely tax-free. This change is a blow to those investors who used to trade in gold bonds through the stock market. However, the relief provisions are expected to continue for investors who will hold the bond till its full term (maturity), but the buyers in the secondary market will now have to loosen their pockets.
