Question 1

What is the difference between the "Assessment Year" and the "Tax Year" under the new Act?

Accepted Answer

The Income Tax Act 2025 eliminates the confusing duality of "Previous Year" and "Assessment Year" that existed for over sixty years. Previously, income earned in one year was filed in the following year, known as the Assessment Year. Under the new system, this is replaced by a single "Tax Year" concept, meaning the year you earn the money is the same year you are taxed on it. For example, income earned in April 2026 is simply referred to as Tax Year 2026–27.

Question 2

How can a salaried employee earning ₹12.75 lakh pay zero income tax?

Accepted Answer

While the tax slabs might suggest otherwise, the effective tax bill can become zero through a combination of a significantly increased standard deduction and an expanded tax rebate under the equivalent of Section 87A. For the 2026–27 tax year, these deductions and rebates allow salaried individuals earning up to ₹12.75 lakh to have a "nil" tax liability, provided they are under the New Tax Regime.

Question 3

How has the 2025 Act simplified the calculation of Capital Gains?

Accepted Answer

The Act has streamlined capital gains by reducing the variety of holding periods into two main categories. For listed securities like stocks and mutual funds, the holding period for "Long Term" status is now a consistent 12 months. For all other assets, such as real estate or gold, the period is 24 months. Additionally, while indexation for assets like real estate has been removed, the tax rate has been lowered to a flat 12.5% to simplify the process and reduce complicated inflation math.

Question 4

What does it mean that the New Tax Regime is now the "Default Tax Regime"?

Accepted Answer

The New Tax Regime is no longer an optional alternative; it is the heart of the tax system. If a taxpayer does not explicitly choose the Old Regime, they are automatically taxed under the New Regime. This system prioritizes lower tax rates and higher standard deductions over specific exemptions like life insurance or home loan interest, moving toward a philosophy where tax is based on what you earn rather than how you spend.

Question 5

What is the "Faceless" system and how does it affect tax assessments?

Accepted Answer

The 2025 Act solidifies "Faceless Assessment" and "Faceless Appeal" systems, where tax processing is handled through a centralized digital portal rather than in-person visits to a tax office. This removes personal bias and "extra-legal" negotiations because the taxpayer and the officer remain anonymous to each other. The system also uses automated data matching to compare a taxpayer's digital footprint—such as luxury purchases or foreign travel—against their reported income to identify discrepancies instantly.

Income Tax Act 2025: Why Filing Just Got Easier

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