Tax Guide
The Income-tax Act 2025: What Actually Changed for You
India's 65-year-old tax law was replaced on 1 April 2026. Here's what the new Act really changes, what it doesn't, and the transition rule that catches most people out.
Updated for the Act as in force from 1 April 2026.
India's 1961 income tax law was repealed on 1 April 2026 and replaced by the Income-tax Act, 2025. The headline change is a single "Tax Year" replacing the confusing "previous year" and "assessment year". But here is what most coverage misses: your tax rates have not changed, and the return you file this July is still under the old Act.
What actually happened
This was a repeal-and-replace, not another amendment. The Income-tax Act, 1961 had accumulated six decades of patches, provisos and explanations, and had become genuinely hard to navigate. The 2025 Act reorganises the whole thing — regrouping provisions in a more logical order, simplifying the language, and folding provisos and explanations into the main text.
The important thing to understand is what this is not. It is a rewrite of the law's structure, not of what you pay. The stated goal was simplification, clarity and fewer disputes — not a heavier tax burden.
The "Tax Year": the change everyone will notice
Under the old law you earned income in a "previous year" and were taxed on it in an "assessment year" — two labels for one continuous process, and a reliable source of confusion. Selecting the wrong assessment year on the portal was one of the most common reasons returns were declared defective.
The 2025 Act collapses both into a single Tax Year, running 1 April to 31 March. Income earned in Tax Year 2026-27 is simply reported for Tax Year 2026-27. No mental arithmetic.
| Old Act (1961) | New Act (2025) |
|---|---|
| Previous Year 2026-27 (when you earn) | Tax Year 2026-27 — one label for both |
| Assessment Year 2027-28 (when you're taxed) |
One neat detail: if a business or income source starts mid-year, its first Tax Year simply runs from that start date to 31 March. A business set up on 1 December 2026 has a Tax Year of 1 December 2026 to 31 March 2027.
The transition trap: which Act applies to you right now
This is the part that trips people up, so read it carefully. The new Act governs income earned from 1 April 2026 onwards. Everything before that date stays under the old Act — including the return you are filing this year.
| What you're doing | Which Act applies |
|---|---|
| Filing your return in July 2026 for income earned in FY 2025-26 | The old Act (1961) — still "AY 2026-27" |
| Paying advance tax from June 2026 on this year's income | The new Act (2025) — Tax Year 2026-27 |
| Filing your first return under the new Act | July 2027, for Tax Year 2026-27 |
| Ongoing assessments or appeals for earlier years | The old Act, until they conclude |
So for a while you are living in both worlds at once: filing under the old law for last year, while earning and paying advance tax under the new one. Both systems run in parallel on the e-filing portal. If you handle finance documents, be careful not to mix the two vocabularies in the same document.
What did not change
Plenty of commentary implies your tax bill is about to move. It isn't — not because of this Act. Rates and slabs are set by the annual Finance Act, not by the Income-tax Act, and they carry on as before.
- Your slabs and rates are unchanged by the new Act.
- The new regime is still the default, and you can still opt out into the old regime.
- Standard deduction, the 87A rebate and the usual deductions continue.
- Capital gains rules — holding periods, set-off and carry-forward — carry over.
- Any option you already exercised under the old Act is treated as if made under the equivalent new provision. You don't need to re-elect.
- Closed years stay closed. The repeal does not reopen assessments completed under the old Act.
Every section number moved
If you know your tax law by section number, prepare to relearn it. The renumbering is wholesale — the familiar salary-TDS provision at Section 192, for example, now sits at Section 392. TDS and TCS provisions have been consolidated into fewer sections with a system of numeric payment codes.
You don't need to memorise the new map. The Income Tax Department has published a section-mapping utility that translates old section numbers to new ones. Use it rather than trusting older articles that still cite 1961 Act numbering.
One substantive change worth knowing: CBDT circulars are now expressly binding on both tax authorities and deductors. The old argument that a circular was merely advisory no longer holds.
Forms are being renamed too
Several forms you may have dealt with are changing name, which causes needless confusion when a bank or CA asks for one thing and the portal shows another.
| Old form | New form | What it's for |
|---|---|---|
| Form 15CA | Form 145 | Your declaration before remitting money abroad |
| Form 15CB | Form 146 | The CA certificate confirming taxes are paid |
| Form 13 | Form 128 | Application for a lower or nil TDS certificate |
Banks and portals are transitioning at different speeds, so confirm which format is currently accepted before you file anything.
Separate from the Act: what Budget 2026 changed
It's worth separating the two, because they landed at the same time and get conflated. These came from the Budget, not the new Act:
- HRA: the 50% metro exemption now covers eight cities — Bengaluru, Hyderabad, Pune and Ahmedabad join Delhi, Mumbai, Kolkata and Chennai. You'll also need to disclose your relationship with your landlord.
- Securities Transaction Tax rates rose, raising costs for active traders.
- Share buybacks are now taxed as capital gains rather than as deemed dividends.
So what do you actually need to do?
For most individuals: very little, and certainly nothing urgent.
- File this year's return as usual — it's still under the old Act, with the old terminology.
- Get used to "Tax Year", which will start appearing on Form 16, Form 26AS and the portal.
- Don't assume your tax has changed. Any change to what you pay comes from the Finance Act, not this one.
- Be sceptical of old articles citing section numbers — check them against the department's mapping utility.
- If you run a business or finance team, update templates, TDS certificate formats and compliance calendars for the new terminology.
Tax Guide
Frequently Asked Questions
The Tax Year, the transition rules, and what the new Act does and does not change for you.
It is India's new income tax law, in force from 1 April 2026, replacing the Income-tax Act 1961 entirely. It reorganises and simplifies the law's structure and language rather than changing what you pay.
A single unified term replacing both 'previous year' and 'assessment year'. It runs from 1 April to 31 March. Income earned in Tax Year 2026-27 is simply reported for Tax Year 2026-27 — no more one-year lag between earning and assessment.
No. Tax rates and slabs are set by the annual Finance Act, not by the Income-tax Act. The new Act does not raise or lower your tax. Any change to what you pay comes from the Budget, separately.
The old Act. Your return filed in 2026 covers income earned in FY 2025-26, which is still governed by the Income-tax Act 1961 and still uses the AY 2026-27 label. The first return under the new Act is filed in July 2027, for Tax Year 2026-27.
Immediately for income you are earning now. Income from 1 April 2026 onwards falls under the new Act, and advance tax paid from June 2026 is already governed by it — even though the return for that income is not due until 2027.
Yes. The new regime remains the default under the 2025 Act, and you can still opt out into the old regime if it suits you better.
No. Any option you validly exercised under the old Act is treated as if it were made under the equivalent provision of the new Act. Nothing needs to be redone.
No. The repeal does not disturb anything relating to years before 1 April 2026. Completed assessments stay valid, and pending proceedings and appeals continue under the old Act until they conclude.
Yes, comprehensively. The salary TDS provision that sat at Section 192, for instance, is now Section 392. The Income Tax Department has published a mapping utility to translate old section numbers into new ones — use it rather than relying on older articles.
Yes. Form 15CA becomes Form 145 and Form 15CB becomes Form 146 for foreign remittances, and Form 13 becomes Form 128 for lower-TDS certificates. Banks and portals are transitioning at different speeds, so confirm which is currently accepted.
Yes. The new Act expressly makes CBDT guidelines binding on tax authorities and deductors alike. The old argument that a circular was merely advisory no longer holds.
Its first Tax Year simply runs from the date the business is set up to the following 31 March. A business set up on 1 December 2026 has a Tax Year of 1 December 2026 to 31 March 2027.
No. Because the Tax Year is aligned with the financial year, no change to your accounting year or financial statements is required.
Separate things, often confused with the Act. The Budget extended the 50% HRA metro exemption to eight cities, raised Securities Transaction Tax rates, and made share buybacks taxable as capital gains rather than deemed dividends.
Most individuals need to do nothing urgent. File this year's return as usual under the old rules, get used to seeing 'Tax Year' on your Form 16 and the portal, and don't assume your tax bill has changed because of the new Act.
The Income Tax Department's e-filing portal carries official guidance on the new Act, including its section-mapping utility. Because the transition is still bedding in, verify anything time-sensitive there or with a qualified tax professional.
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