Impact of the Income Tax Act, 2025 on Individuals and Businesses in India
Keywords:
Tax Reforms, Income Tax Act 2025, Individuals, Businesses, IndiaAbstract
The Income Tax Act, 2025 marks a significant milestone in India's fiscal and taxation framework
by replacing the long-standing Income Tax Act, 1961. Designed to modernize and simplify the
country's direct tax system, the new legislation seeks to enhance transparency, reduce
compliance burdens, promote digital governance, and align tax administration with the needs of
a rapidly evolving economy. This study is based on secondary data collected from government
reports, policy documents, tax portals, published literature, and related news sources. Adopting a
descriptive and analytical approach, the paper examines the salient features of the new Act and
evaluates its impact on individual taxpayers and business entities.
The study highlights several important reforms, including the introduction of a single "Tax Year"
concept, simplified legislative structure, digital-first and faceless compliance mechanisms,
consolidation of tax provisions, expanded coverage of virtual digital assets, and improved
dispute-resolution procedures. For individuals, the Act offers greater clarity, enhanced
transparency, simplified filing procedures, and increased tax relief under the new tax regime.
However, challenges such as reduced exemptions, changes in salary taxation, digital literacy
requirements, and transitional adjustments remain significant concerns. For businesses, the
legislation improves ease of doing business through streamlined compliance requirements,
clearer tax provisions, and reduced litigation, while also presenting challenges related to
technological adaptation and implementation costs.
The findings suggest that although short-term adjustment issues may arise, the Income Tax Act,
2025 represents a progressive and forward-looking reform that can strengthen tax administration,
improve compliance, encourage economic growth, and support India's long-term development
objectives.
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