NEW DELHI: India overhauled its tax regime in 2025 with sharp cuts in Goods and Services Tax (GST) rates and a higher income tax exemption limit, with the spotlight now turning to customs duty rationalisation and procedural simplification in the coming Budget.

Next year will see the new simplified Income Tax Act, 2025, to come into effect from April 1, replacing the over six-decade-old current Income Tax Act, 1961.

Also, two new laws - one to levy additional excise duty on cigarettes and another to levy cess on pan masala over and above GST rates will be implemented on a date decided by the government.

The tax reforms rolled out by the government in 2025 were aimed at stimulating demand amid a challenging global economic environment. With tariff uncertainties casting a shadow over economic decision-making, India’s tax reform measures focused on boosting domestic demand to drive consumption and support growth.

A key highlight was the reduction of GST rates on about 375 goods and services effective September 22, which lowered the tax burden on commonly used items and addressed long-standing concerns over inverted duty structures.