India updates income tax regime and faces legal challenge to assessment laws

India is transitioning its tax framework as the new income tax regime, previously governed by Section 115BAC of the Income-tax Act, 1961, moves to Section 202 of the Income-tax Act, 2025. Effective from 1 April 2026, the regime maintains existing tax slabs, including a 30% rate for income exceeding ₹24 lakh. Salaried taxpayers retain a standard deduction of ₹75,000, and eligible residents can claim a rebate of up to ₹60,000 on qualifying income up to ₹12 lakh. Under these provisions, eligible salaried individuals earning up to ₹12.75 lakh may face no income tax liability.

Separately, the Orissa High Court has issued a notice to the Central Board of Direct Taxes (CBDT) regarding a petition challenging the constitutional validity of Section 147A of the Income Tax Act, 1961. The petitioner, Ashok Kumar Sahu, argues that Section 147A—introduced by the Finance Act, 2026, with retrospective effect from 1 April 2021—confers arbitrary powers and violates constitutional rights. The challenge follows a similar ruling by the Punjab and Haryana High Court, though the Supreme Court has stayed that specific judgment pending further review.