The New Income Tax Act Removes a Word I Never Understood

For years I could not work out why a tax return for 2024-25 was filed under “assessment year 2025-26.” From April 1, India stopped doing that.

A law from 1961

On April 1, the Income Tax Act, 2025 replaced the law India had used since 1961. Over six decades, the old act had been amended so many times that even accountants needed cross-references to read it. The new law keeps the same tax rates and slabs, so most people will not pay a rupee more or less because of it. What changes is the language, the structure and some of the vocabulary.

My mother is a chartered accountant, and every July our dining table is covered in forms. The phrase that confused me most was “assessment year.” Income you earned in one financial year was assessed in the next, so every return carried two different years. My mother explained it to me three times. I nodded each time and understood it none of those times.

One tax year

The new act replaces both “previous year” and “assessment year” with a single tax year, which runs from April to March. Income earned in the tax year 2026-27 belongs to the tax year 2026-27. It sounds obvious, which is exactly the point. A tax system that ordinary people can read is more likely to be followed correctly.

The new law is also shorter and reorganised, with tables replacing long paragraphs of conditions, and obsolete provisions removed. Section numbers have changed, which will annoy professionals for a year or two, since everyone knows “80C” and now has to learn new references.

Why simplicity matters

Complicated tax law has costs beyond confusion. People pay advisers to understand it, businesses spend time on compliance instead of work, and disputes pile up in courts because words can be read in more than one way. India has a large backlog of tax cases, many of them about interpretation. Clearer language will not end those disputes, but it can reduce how many new ones begin.

Simplification also matters for trust. When people believe a system is fair and understandable, they are more willing to participate in it. Only a small share of Indians file income tax returns, and fewer still pay any tax after deductions. Making the law readable will not change that by itself, but it removes one excuse. For students like me, who will file our first returns in a few years, it means starting with a system that finally speaks plainly.