Taxpayers to get simplified income tax regime from April 1 as Budget proposals, new I-T Act come into play

From April 1, 2026, taxpayers will have a much simpler and easier income tax regime giving certainty and clarity on all issues, said Ravi Agrawal.

This will be on the back of the New Income Tax Act,1961, which will come into effect from April 1 as well as the announcements in the Union Budget 2026-27 that include several measures aimed at decriminalisation, reducing litigation and providing certainty on taxation to industry and investors, he further said.

In a post-Budget interaction with Business Today, the CBDT chief underlined that there is a thought process behind all these decisions with the ultimate goal to provide taxpayers with a simplified income tax regime from the start of the new fiscal year 2026-27.

The income tax department is also gearing up for the implementation of the new IT Act and is getting rules, regulations and forms in place. "We are trying to minimise all teething issues," Agrawal said.

Work on revamping the income tax portal is also underway but given the substantial amount of work involved, it could take longer than the April 1 deadline. However, the CBDT will ensure that each of the utilities and functionalities on the portal are in place and fully functional before their respective deadlines to ensure that taxpayers do not face any problems in filing and paying their taxes and returns 

The old income tax regime will also continue, Agrawal said, adding that there is no plan to phase it out even as most taxpayers have switched to the new tax regime that offers lower rates with no exemptions.

In Assessment Year (AY) 2025-26, 88% of income taxpayers under ITRs 1,2,3,4 had moved to the new income tax regime. This was a 12% jump from AY 2024-25, when 76% income taxpayers had moved to the new tax regime.

Overall, 86% taxpayers switched to the income tax regime in AY 2025-26 as against 75% in AY 2024-25.

The CBDT expects this to rise further and more people to join the new tax regime in AY 2026-27, Agrawal said pointing out that they will be able to avail the benefit of paying no tax on income up to Rs 12 lakh in the new regime.