What Happened
- CBDT Chairman Ravi Agrawal confirmed that the Income Tax Department has no "sunset date" in mind for discontinuing the old tax regime, even though 88% of individual taxpayers have migrated to the new tax regime in Assessment Year 2025-26.
- 95% of income tax refunds have been disbursed, with the remainder expected to be processed within February 2026.
- The CBDT Chairman attributed the decline in refund volumes not to deliberate delays but to structural changes: rationalised TDS rates mean less excess tax is deducted at source, and migration to the new regime has reduced deduction-based refund claims.
- The statement comes in the context of the Income-tax Act, 2025 (effective from 1 April 2026), which represents a comprehensive overhaul of India's direct tax framework.
- Taxpayers in the old regime retain the option due to certain deductions (such as HRA, Section 80C, 80D) that they find more beneficial than the lower slab rates of the new regime.
Static Topic Bridges
Old Tax Regime vs. New Tax Regime: Structure and Rationale
India currently operates a dual income tax regime. The new tax regime, introduced via the Finance Act, 2020 (Section 115BAC), offers lower tax slab rates but eliminates most exemptions and deductions. The old regime retains approximately 70 exemptions and deductions, including HRA (Section 10(13A)), Section 80C (investments up to Rs 1.5 lakh), Section 80D (health insurance), and standard deduction. The new regime was made the default regime from AY 2024-25 (Finance Act, 2023).
- New regime tax slabs (AY 2026-27, as per Budget 2026): 0% up to Rs 12 lakh (effectively, due to rebate under Section 87A); 5% for Rs 4-8 lakh; 10% for Rs 8-12 lakh; 15% for Rs 12-16 lakh; 20% for Rs 16-20 lakh; 25% for Rs 20-24 lakh; 30% above Rs 24 lakh.
- Standard deduction of Rs 75,000 available under the new regime (increased from Rs 50,000 in Budget 2024).
- Old regime: 5% for Rs 2.5-5 lakh; 20% for Rs 5-10 lakh; 30% above Rs 10 lakh.
- Taxpayers with significant home loan interest (Section 24), HRA claims, or high 80C/80D investments may still benefit from the old regime.
- 88% of individual taxpayers opted for the new regime in AY 2025-26, indicating the lower rates are attractive for the majority without large deduction claims.
Connection to this news: The CBDT Chairman's assurance of no sunset date addresses concerns that the old regime would be forcibly discontinued, protecting taxpayers who still benefit from the deduction-heavy structure.
Income-tax Act, 2025: India's New Direct Tax Framework
The Income-tax Act, 2025 replaces the Income-tax Act, 1961, which had accumulated approximately 819 sections across 47 chapters over six decades of amendments. The new Act, which received Presidential assent on 21 August 2025, reduces the law to 536 sections across 23 chapters and 16 schedules, cutting the word count from 5.12 lakh to 2.60 lakh.
- The Act replaces the twin concepts of "Assessment Year" and "Previous Year" with a single unified "Tax Year" (the financial year commencing 1 April).
- Virtual Digital Assets (VDAs), including cryptocurrencies and tokenised assets, are formally defined and brought within the tax framework.
- The Act aims to reduce litigation by simplifying language, removing redundant provisions, and standardising definitions.
- An internal CBDT committee conducted the comprehensive review; the Income Tax Bill 2025 was tabled in Lok Sabha on 13 February 2025.
- Effective date: 1 April 2026, meaning it will first apply to Tax Year 2026-27.
Connection to this news: The CBDT Chairman's remarks about refund processing and old regime continuity must be understood in the context of this transitional period, where both the old Act (1961) and the new Act (2025) overlap in their applicability.
Central Board of Direct Taxes (CBDT): Role and Functions
The Central Board of Direct Taxes (CBDT) is a statutory authority functioning under the Central Board of Revenue Act, 1963. It is the apex body for the administration of direct tax laws in India, operating under the Department of Revenue in the Ministry of Finance. CBDT provides policy inputs for direct tax legislation and is responsible for the administration of direct taxes through the Income Tax Department.
- CBDT is headed by a Chairman and comprises six Members (Income Tax, Legislation and Computerisation, Investigation, Audit and Judicial, Revenue, and Taxpayer Services).
- The Income Tax Department, administered by CBDT, has approximately 75,000 employees across India.
- CBDT issues circulars and notifications for the implementation of tax laws, which are binding on tax authorities.
- The Faceless Assessment Scheme (launched in 2020) and Faceless Appeal Scheme aim to eliminate the human interface in tax assessment, reducing discretion and corruption.
- Direct tax collections have grown significantly: Rs 19.60 lakh crore in FY 2024-25 (provisional), reflecting improved compliance and base broadening.
Connection to this news: The CBDT Chairman's public assurances on refund timelines and old regime continuity reflect the Board's role in managing taxpayer confidence during a major legislative transition, while the 95% refund disbursement rate demonstrates the impact of faceless processing systems.
Key Facts & Data
- 88% of individual taxpayers opted for the new tax regime in AY 2025-26.
- 95% of income tax refunds disbursed; remainder expected within February 2026.
- No sunset date planned for the old tax regime.
- Income-tax Act, 2025: 536 sections (down from 819), 23 chapters (down from 47); effective 1 April 2026.
- New regime (Budget 2026): effectively zero tax up to Rs 12 lakh income (with Section 87A rebate).
- Standard deduction: Rs 75,000 under new regime.
- Direct tax collections: Rs 19.60 lakh crore in FY 2024-25 (provisional).
- CBDT operates under the Central Board of Revenue Act, 1963.