Redefining Salary Taxation in India Under the Income Tax Act, 2025: A Critical Analysis of Structural Changes and Their Impact on Salaried Individuals

The taxation of salary income in India has witnessed a notable shift with the introduction of the Income Tax Act, 2025, signalling a broader move towards simplification and expansion of the taxable base. While existing scholarship has largely focused on comparisons between tax regimes and general reform measures, relatively limited attention has been paid to the structural reconfiguration of salary taxation and its implications for salaried individuals. Against this backdrop, the present study undertakes a critical examination of the legal and structural changes introduced under the new framework, with particular emphasis on their impact on tax burden, compliance, and equity. The study is based on a doctrinal and analytical approach, involving a comparative reading of the provisions of the Income Tax Act, 1961 and the revised framework. Attention is directed towards key areas such as the expanded scope of salary, the treatment of perquisites, changes in deduction structures, and the broader shift towards a simplified tax regime. The analysis suggests that the revised framework contributes to greater clarity and administrative ease, reducing reliance on interpretational practices that characterised the earlier system. At the same time, the explicit inclusion of a wider range of compensation components leads to an expansion of the taxable base, producing varied outcomes across income groups. While middle-income earners appear to benefit modestly from the enhanced standard deduction, individuals with higher and more diversified compensation structures may face an increased effective tax burden. Overall, the study indicates that the Income Tax Act, 2025 reflects a transition from a deduction-driven approach to a more comprehensive system of taxation. This shift carries important implications for policy formulation, taxpayer behaviour, and the distributional aspects of income taxation.