What Happened
- The Income Tax Department released draft rules and forms for the new Income Tax Act 2025, along with two navigators that map old rules and forms to their new equivalents.
- The navigators allow taxpayers and tax professionals to identify corresponding provisions between the 1961 and 2025 frameworks without re-learning the entire system.
- ITR forms have been redesigned with standardized common information fields across forms, reducing duplication and enabling automated reconciliation.
- The new forms incorporate prefill capabilities using data from TDS returns, bank statements, and other sources to make filing more intuitive.
- The draft rules aim to remove obsolete provisions that had accumulated over six decades of amendments to the Income Tax Act 1961.
Static Topic Bridges
Evolution of India's Direct Tax System
India's modern income tax history dates back to 1860, when it was first introduced by Sir James Wilson during British rule. The Income Tax Act 1922 was the first comprehensive statute, replaced by the Income Tax Act 1961 which governed direct taxation for over 64 years. The 2025 Act represents the third major legislative overhaul in India's income tax history.
- The Income Tax Act 1961 originally had 298 sections but expanded to 819 through continuous amendments over six decades.
- The Direct Tax Code (DTC) was proposed multiple times (2009, 2010, 2013) but never enacted — the 2025 Act achieves its core objectives.
- Successive Finance Commissions and tax reform committees (Chelliah 1991, Kelkar 2003, Arbind Modi Committee 2017) recommended comprehensive simplification.
- The 2025 Act eliminates nearly half the provisions while retaining substantive tax law, focusing on removing redundant, obsolete, and overlapping provisions.
Connection to this news: The navigators mapping old rules/forms to new ones directly address a key challenge of any major legislative overhaul — ensuring continuity and ease of transition for millions of existing taxpayers and professionals.
Digital Governance and E-Governance in Taxation
India's tax administration has been at the forefront of the country's e-governance transformation. The Income Tax Department's digital infrastructure handles over 8 crore annual returns and processes crores of TDS statements automatically.
- E-filing was introduced in 2006; by 2024-25, nearly all returns are filed electronically.
- The Faceless Assessment Scheme (2020) and Faceless Appeal Scheme removed physical interface between taxpayers and officials.
- The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) provide pre-filled data from multiple sources.
- Project Insight, the department's data analytics platform, uses AI and big data to identify non-filers and under-reporters.
Connection to this news: The redesigned forms with automated reconciliation and prefill capabilities build on this digital infrastructure, and the online feedback mechanism itself exemplifies digital governance principles.
Ease of Doing Business and Compliance Burden
India's ranking on the World Bank's former Ease of Doing Business index improved from 142 (2014) to 63 (2019), with "paying taxes" being one of the key parameters. Reducing compliance burden in taxation remains central to the government's strategy to attract investment and formalize the economy.
- The "paying taxes" indicator measures time spent on compliance, number of tax payments, and total tax rate.
- India introduced the Vivad se Vishwas schemes (2020, 2024) to reduce pending tax litigation, which had crossed 5 lakh cases.
- GST compliance simplification has been ongoing with quarterly return filing for small taxpayers and automated reconciliation.
- The World Bank discontinued the Doing Business rankings in 2021; the Business Ready (B-READY) index now tracks similar parameters.
Connection to this news: Reducing rules from 511 to 333 and forms from 399 to 190 directly reduces compliance time and effort, supporting India's goal of a simpler, more business-friendly tax environment.
Key Facts & Data
- Two navigators released mapping old rules/forms to new draft rules/forms.
- Rules reduced: 511 to 333 (35% reduction).
- Forms reduced: 399 to 190 (52% reduction).
- New forms feature standardized common fields and prefill capabilities.
- Income Tax Act 2025 effective from April 1, 2026.
- Income Tax Act 1961 had grown from 298 sections to 819 over 64 years.
- Public feedback open until February 22, 2026, across four categories.