Income-tax Act, 2025 vs Income-tax Act, 1961 Section-wise Comparative Analysis of the Five Heads of Income
Income-tax Act, 2025 vs Income-tax Act, 1961
Section-wise Comparative Analysis of the Five Heads of Income
Introduction
The Income-tax Act, 2025 has replaced the Income-tax Act, 1961 with effect from 1 April 2026. The new legislation primarily focuses on simplification, structural reorganisation, consolidation of provisions and improved readability. Most fundamental principles of taxation remain substantially unchanged, although section numbers and arrangement of provisions have undergone significant restructuring.
Key Highlights
| Particulars | Position under ITA 2025 |
|---|---|
| Effective Date | 1 April 2026 |
| Previous Year Concept | Replaced with Tax Year |
| Section Numbering | Completely reorganised |
| Core Tax Principles | Largely retained |
| TDS Provisions | Consolidated |
| Exemptions | Shifted to Schedules |
| Tax Slabs | Broadly continued |
1. Income from Salaries
Salary taxation continues to cover remuneration received by an employee from an employer including wages, pension, gratuity, commission, perquisites and profits in lieu of salary.
| Particulars | ITA 1961 | ITA 2025 | Nature |
|---|---|---|---|
| Chargeability | Sec 15 | Sec 16 | Renumbered |
| Definition of Salary | Sec 17(1) | Sec 17 | Renumbered |
| Perquisites | Sec 17(2) | Sec 17 | Largely retained |
| Profits in lieu of Salary | Sec 17(3) | Sec 18 | Renumbered |
| Standard Deduction | Sec 16(ia) | Sec 19 | ₹75,000 retained |
| Entertainment Allowance | Sec 16(ii) | Sec 19 | No major change |
| Professional Tax | Sec 16(iii) | Sec 19 | No major change |
Important Observation
The taxation framework for salary income remains substantially unchanged. Most modifications relate to section renumbering and reorganisation of exemption provisions into schedules.
2. Income from House Property
Income from House Property continues to be taxed on the basis of annual value of property owned by the assessee.
| Particulars | ITA 1961 | ITA 2025 |
|---|---|---|
| Chargeability | Sec 22 | Sec 20 |
| Annual Value | Sec 23 | Sec 21 |
| Self Occupied Property | Sec 23(2) | Sec 21 |
| Deemed Let Out Property | Sec 23(4) | Sec 21 |
| Standard Deduction | Sec 24(a) | Sec 22 |
| Housing Loan Interest | Sec 24(b) | Sec 22 |
| Co-owner Property | Sec 26 | Sec 24 |
| Unrealised Rent | Sec 25A | Sec 23 |
Key Observation
The framework relating to self-occupied property, housing loan interest, deemed let-out property and annual value computation continues substantially without major changes.
3. Profits and Gains of Business or Profession (PGBP)
This head has witnessed the largest structural reorganisation under the new Act.
| Particulars | ITA 1961 | Corresponding ITA 2025 Provision |
|---|---|---|
| Chargeability | Sec 28 | Sec 26 |
| General Business Expenditure | Sec 37(1) | Sec 32 |
| Depreciation | Sec 32 | Sec 33 |
| Employee Welfare Contributions | Sec 36(1)(va) | Sec 29 |
| Bad Debts | Sec 36(1)(vii) | Sec 31 |
| Scientific Research | Sec 35 | Corresponding provision retained |
| Presumptive Taxation – Business | Sec 44AD | Sec 55 |
| Presumptive Taxation – Profession | Sec 44ADA | Sec 56 |
| Tax Audit | Sec 44AB | Sec 63 |
| Books of Account | Sec 44AA | Corresponding provision retained |
Significant Structural Development
A new presumptive taxation framework has been introduced for specified non-resident service providers engaged with electronics manufacturing activities. Readers should independently verify the final scope and applicable Rules before relying on this provision.
4. Capital Gains
Capital gains continue to arise upon transfer of capital assets.
| Particulars | ITA 1961 | ITA 2025 |
|---|---|---|
| Chargeability | Sec 45 | Sec 67 |
| Computation | Sec 48 | Corresponding provision under Sec 68 |
| Residential House Exemption | Sec 54 | Sec 85 |
| Investment in Residential House | Sec 54F | Sec 86 |
| Specified Bonds | Sec 54EC | Sec 87 |
| Capital Loss Carry Forward | Sec 74 | Sec 111 |
| Stamp Duty Value | Sec 50C | Retained |
| Unlisted Shares FMV | Sec 50CA | Retained |
Important Capital Gains Developments
| Topic | Position |
|---|---|
| LTCG on Listed Equity | 12.5% above ₹1.25 lakh threshold |
| STCG on Listed Equity | 20% |
| Indexation | Retained for specified assets |
| Section 54 Cap | ₹10 crore retained |
The Finance Act 2024 capital gains changes have been incorporated into the structure of the new legislation.
5. Income from Other Sources
Income not chargeable under any of the other four heads continues to fall under this residuary head.
| Particulars | ITA 1961 | ITA 2025 |
|---|---|---|
| Chargeability | Sec 56 | Sec 92 |
| Dividend Income | Sec 56(2)(i) | Sec 92 |
| Gifts | Sec 56(2)(x) | Sec 92 |
| Angel Tax | Sec 56(2)(viib) | Sec 92 |
| Family Pension | Sec 56(2)(iia) | Sec 92–93 |
| Deductions | Sec 57 | Sec 93 |
| Disallowances | Sec 58 | Sec 94 |
Substantive Change
Family pension deduction continues with the enhanced deduction framework introduced through recent amendments.
Cross-Cutting Provisions
| Topic | ITA 1961 | ITA 2025 |
|---|---|---|
| Intra-head Set Off | Sec 70 | Sec 107 |
| Inter-head Set Off | Sec 71 | Sec 108 |
| Business Loss Carry Forward | Sec 72 | Sec 109 |
| Capital Loss Carry Forward | Sec 74 | Sec 111 |
| Section 80C | Sec 80C | Sec 123 |
| Section 80D | Corresponding deduction provision remapped | |
| Section 80TTA | Corresponding deduction provision remapped | |
| Section 80TTB | Corresponding deduction provision remapped | |
| New Tax Regime | Sec 115BAC | Sec 202 |
| TDS Framework | Sec 192–194T | Sec 393 |
Major Structural Changes
- Introduction of Tax Year concept
- Consolidation of TDS provisions
- Reorganisation of exemption provisions
- Simplified drafting language
- Section renumbering across the Act
Summary
| Area | Impact |
|---|---|
| Salary | Mostly renumbered |
| House Property | Mostly renumbered |
| PGBP | Significant restructuring |
| Capital Gains | Existing framework retained with incorporated amendments |
| Other Sources | Limited substantive changes |
| TDS | Major consolidation |
| Exemptions | Shifted to schedules |
| Terminology | Tax Year introduced |
Conclusion
The Income-tax Act, 2025 represents a comprehensive legislative re-codification rather than a complete redesign of India's direct tax framework. Tax professionals, businesses and taxpayers should focus on understanding the revised section references and structural changes while recognising that most taxation principles continue substantially unchanged.
Disclaimer
This article is intended solely for educational and professional reference purposes. The Income-tax Act, 2025, corresponding Rules, Forms, CBDT utilities, Notifications and transition clarifications should be independently verified before adopting any tax position or compliance strategy. Certain section references may require confirmation through the official CBDT section mapping utility and subsequent amendments.
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