UPSC Prelims Practice Questions — THE INCOME TAX ACT,2025 TO COME INTO EFFECT FROM 1ST APRIL, 2026
Q1. With reference to the structural features of the Income-tax Act, 2025 as compared with the Income-tax Act, 1961, consider the following:
1. It comprises 536 sections.
2. It comprises 16 schedules.
3. It reduces the number of schedules relative to the 1961 Act.
4. It repeals and replaces the Income-tax Act, 1961.
Which of the above is/are correctly identified?
- It comprises 536 sections.
- It comprises 16 schedules.
- It reduces the number of schedules relative to the 1961 Act.
- It repeals and replaces the Income-tax Act, 1961.
- A. 1, 2 and 4
- B. 1 and 3 only
- C. 2, 3 and 4
- D. 1 and 2 only
Q2. The new direct-tax statute that replaces the Income-tax Act, 1961 has been enacted as which one of the following?
- A. Income-tax Act, 2025 (Act No. 30 of 2025)
- B. Income-tax Act, 2025 (Act No. 24 of 2025)
- C. Income-tax Act, 2026 (Act No. 3 of 2026)
- D. Income-tax Act, 2025 (Act No. 43 of 1961)
Q3. With reference to the legislative journey of the Income-tax Act, 2025, consider the following:
1. The Income-tax Bill, 2025 was introduced in the Lok Sabha in February 2025.
2. The Bill was referred to a Select Committee of the Lok Sabha.
3. It received the assent of the President in August 2025.
4. It was enacted as Act No. 24 of 2025.
Which of the above is/are correctly identified?
- The Income-tax Bill, 2025 was introduced in the Lok Sabha in February 2025.
- The Bill was referred to a Select Committee of the Lok Sabha.
- It received the assent of the President in August 2025.
- It was enacted as Act No. 24 of 2025.
- A. 1, 2 and 3
- B. 1, 3 and 4
- C. 2 and 4 only
- D. 1, 2 and 4
Q4. In the context of the enactment of the Income-tax Act, 2025, the 'Select Committee' to which the Income-tax Bill, 2025 was referred is best described as which one of the following?
- A. A committee of members of the Lok Sabha constituted specifically to examine that Bill and report its recommendations back to the House
- B. A permanent departmentally-related standing committee that scrutinises the demands for grants of the Ministry of Finance
- C. A drafting body of the Central Board of Direct Taxes that frames the income-tax rules and forms
- D. A joint committee of both Houses mandated to examine every money bill before passage
Q5. Which one of the following is the Income Tax Department's flagship nationwide multimedia outreach programme launched to build awareness about the Income-tax Act, 2025?
- A. PRARAMBH 2026
- B. Vivad se Vishwas
- C. e-Sahyog
- D. Taxpayers' Charter
Q6. The Income-tax Rules, 2026, notified to operationalise the Income-tax Act, 2025 before its commencement, were issued by which one of the following?
- A. Central Board of Direct Taxes
- B. Central Board of Indirect Taxes and Customs
- C. Financial Intelligence Unit-India
- D. Enforcement Directorate
Q7. The Central Board of Direct Taxes (CBDT), which administers the Income-tax Act, 2025, functions under which one of the following?
- A. Department of Revenue, Ministry of Finance
- B. Department of Economic Affairs, Ministry of Finance
- C. Department of Financial Services, Ministry of Finance
- D. Ministry of Corporate Affairs
Q8. Which one of the following is the apex body responsible for the administration of direct taxes and the implementation of the Income-tax Act, 2025?
- A. Central Board of Direct Taxes
- B. Central Board of Indirect Taxes and Customs
- C. Income Tax Appellate Tribunal
- D. Central Board of Trustees
Q9. With reference to the direct-tax reforms announced in the Union Budget 2026-27 alongside the roll-out of the Income-tax Act, 2025, consider the following:
1. TCS on the sale of scrap and minerals rationalised to 2 percent.
2. TCS under the Liberalised Remittance Scheme for education and medical purposes reduced from 5 percent to 2 percent.
3. Buyback of shares to be taxed as capital gains in the hands of shareholders.
4. The long-term capital gains tax rate on listed equity raised to 20 percent.
Which of the above is/are NOT correct?
- TCS on the sale of scrap and minerals rationalised to 2 percent.
- TCS under the Liberalised Remittance Scheme for education and medical purposes reduced from 5 percent to 2 percent.
- Buyback of shares to be taxed as capital gains in the hands of shareholders.
- The long-term capital gains tax rate on listed equity raised to 20 percent.
- A. 4 only
- B. 1 only
- C. 2 and 3 only
- D. 1 and 4 only
Q10. In the Union Budget 2026-27, the tax collected at source (TCS) on the sale of scrap, minerals and alcoholic liquor was rationalised to which single uniform rate?
- A. 2 percent
- B. 5 percent
- C. 1 percent
- D. 0.1 percent
Q11. With reference to how the drafting of the Income-tax Act, 2025 differs from that of the Income-tax Act, 1961, consider the following statements:
1. The 2025 Act converts many explanations and provisos of the earlier law into sub-sections.
2. The 2025 Act incorporates formulae and tables across provisions to improve clarity.
3. The simplification removed all substantive tax provisions of the 1961 Act, thereby altering the underlying tax policy.
Which of the statements given above is/are correct?
- The 2025 Act converts many explanations and provisos of the earlier law into sub-sections.
- The 2025 Act incorporates formulae and tables across provisions to improve clarity.
- The simplification removed all substantive tax provisions of the 1961 Act, thereby altering the underlying tax policy.
- A. 1 and 2 only
- B. 1 only
- C. 2 and 3 only
- D. 1, 2 and 3
Q12. Which one of the following statements about the levy of income tax under the Income-tax Act, 2025 is correct?
- A. The rates of income tax for a financial year continue to be prescribed by the annual Finance Act, the 2025 Act leaving the underlying rates and regimes unchanged
- B. The 2025 Act fixes permanent tax rates that can never be revised in future years
- C. Under the 2025 Act all income, including agricultural income, becomes taxable for the first time
- D. The Act imposes an entirely new schedule of higher rates applicable from 1 April 2026