The new Income Tax Law is going to be implemented from the beginning of the next financial year 2026-27. The government is preparing to notify all the rules of the new law through a consolidated notification by December 31, 2025. A senior government official told Moneycontrol that the new tax framework will be supported by around 400 rules and 180 forms. This number is down from more than 500 under the previous law. The purpose of the new income tax law is to simplify the compliance of rules and improve administration.
“By December 31, we will notify all the rules in a consolidated notification. Budget work will also start simultaneously. There will be a lot of work in the system – we will test the rules, do a trial run, and work together in the fourth quarter,” the official said.
Income Tax Bill, 2025 becomes law in August
After getting approval from both the Houses of Parliament, the Income Tax Bill, 2025 also got approval from President Draupadi Murmu in August 2025. After that it became law. In this, along with simplifying the tax laws, the number of words in the law will also be reduced, which will make it easier to understand. There is no provision for any new income tax rate in the new law. The new law removes unnecessary provisions and outdated language. The number of sections in the Income Tax Act of 1961 was 819 but in the new Act it has reduced to 536. Similarly, the number of chapters has reduced from 47 to 23. In the new Income Tax Act, the number of words has been reduced from 5.12 lakh to 2.6 lakh.
In tax administration, rules set out the procedures for implementing the provisions of key tax laws – such as how liabilities will be calculated, how refunds will be processed, or exemptions will be applied. Forms, on the other hand, are standard templates through which taxpayers and businesses collect information, file returns or make claims. These rules and forms together form the basis of any tax system in terms of its implementation.
Integration of the system will continue till January-March 2025
Once the rules are notified, the IT infrastructure will be created. For this, backend work will continue till January-March 2025 quarter. According to the official, the forms are being compiled and merged, and prototypes will be created and tested before enabling them on the system. It further said, “Before enabling the forms after the notification, utilities will be created. Prototypes will be tested, integrated with data and checked. Every form requires detailed development, integration, testing, checking. This work will be further intensified in the March quarter.” The process of system integration will go on simultaneously with budget preparations.