The Inordinate Transition: A Jurisprudential Exploration Of The Income-Tax Act, 2025

I. Introduction: The farewell of a Legacy Regime

The Income Tax Act,1961, is on the verge of dying, a law that has been the foundation of the Indian fiscal policy in the last sixty years. The Indian tax environment, as of 1 April 2026, is going to be regulated with the help of the Income-tax Act, 2025. It is not just a legislative revision, but a full-scale rearrangement to put India in line with the requirements of the digital economy and to the world shift towards tax transparency. To the legal practitioner, the dilemma is on the way to work across the bridge between these two regimes specifically the continuation of litigation and reinterpretation of established principles. The main rationale of the new Act, which was emphasized in the Explanatory Memorandum to the  Finance Bill 2025, was the complexity of the old regime in 1961. The Act of 1961 in the course of more than sixty years had been a maze of thousands of additions, provisos and non-obstante provisions which, in many cases, distorted the original purpose of the legislation. The 2025 Act will also aim at reviving the tax certainty by cutting the overall number of sections to around 536 as compared to the 800 or more sections today. The most obvious example of this consolidation is the reorganization of exemptions, and the creation of a single concept of the Tax Year, which has at last eliminated the disastrous, two-way, concept of the Previous Year and the Assessment Year. This organizational transformation resembles the efficiency targets established with regards to the  Taxpayer's Charter. 

Related:  Best Tax Law Firm

II. Systemic Conveyance and Jurisprudential Flow

It is a key pillar of this new regime that gives statutory status to the Taxpayer Charter. The fact that the Charter is placed in the body of the Act as opposed to being published as an administrative circular is one of the underlying power shifts between the Revenue and the assessee. Article 226 of the constitution of India now provides a means by which taxpayers may obtain writ redress on infringements of statutory rights specially guaranteed by the new Act, like the right to an early refund and the right to professional assistance. This has changed to Rights-Based Taxation, and this is a major contrast to the power-based taxation that is more adversarial as was observed in the previous decades of the 1961 Act. More so, the 2025 Act makes the Faceless Assessment Scheme the default mechanism obligatory. The jurisprudence of this was resolved in a landmark case of Union of India vs Ashish Agarwal where the Supreme Court pointed out that procedural amendments cannot be applied to give life to time barred action. This has the effect that, under the provisions of the 2025 Act, the Revenue would not be able to re-open a case that had already been sheltered by the limitation periods of the 1961 Act under the new “Simplified Re-assessment” procedures.

The Parallel Track of litigation is also an issue that the legal community has to contend with. Although the new Act applies to all income earned on or after 1 April 2026, the 1961 Act will still be applied to determine the terms of any pending assessment and appeal with regards to years before that date. This is regulated by the principles in Section 24 of the General Clauses Act 1897 which provides that upon a statute being repealed and re-enacted, such appointment, notification, or scheme as was made under the repealed statute remains in force, unless inconsistent with the new statute. This will ensure that the bulk of case law including the provisions on Minimum Alternate Tax (MAT) and tax credits set by CIT v Tulsyan NEC Ltd will be very persuasive and applicable to the new provisions which are similar to the previous sections. The most viable improvement is probably the introduction of the Consolidated TDS Table in the Income-tax (No. 2) Bill 2025. As the Act migrates out of the fragmented network of sections (192 to 195) and steps towards a schedule based approach, the Act minimizes the Compliance Drag that has been clouding the perceptions of the Indian business operations. This structural logic is created to support the ease of doing business and with the assurance that the capability of the Revenue to trace the Electronic Trail of transactions will be increased with the assistance of AI-driven data matching.

III. Conclusion: Towards a developed Fiscal Future

The Income-tax Act, 2025 is a great step in the direction of a more adult tax jurisdiction. It recognizes that in a digital asset, globalized service world, a 1960s-era code, however how much it is hacked, is no longer viable. This will be a few years of extreme unlearning and re-learning on the part of the young lawyer and the old practitioner. The key to effecting such a successful transition will not only lie in the letter of the new law, but also in the fairness in application of constitutionality which has always been a hallmark of the Indian direct tax regime and the strict judicial review which has been a feature of the Indian direct tax regime. The attention should be paid to the fact that as we start approaching the 1 April 2026 deadline, it is needed to ensure that the transition would not result in the vacuum of authority, but in a more streamlined, transparent, and  taxpayer-friendly environment that would contribute to the economic growth.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.