Income-tax Act 2025: What Changes From 1 April 2026 (and What Does Not)
The Income-tax Act 2025 is in force from 1 April 2026, but your AY 2026-27 return is still filed under the 1961 Act. Here is what actually changes, what only looks different, and what you need to do this year and next.
Key takeaways
- The Income-tax Act 2025 applies from tax year 2026-27, which began on 1 April 2026. Returns for FY 2025-26 (AY 2026-27), due 31 July 2026 or belated by 31 December 2026, are filed under the Income-tax Act 1961.
- The single "tax year" replaces the previous year and assessment year pair. Income earned in tax year 2026-27 is reported in a return due in 2027.
- The Act does not change tax slabs, rates, the ₹75,000 standard deduction, the 87A rebate or capital gains rates. Rates continue to come from each year's Finance Act.
- Sections and forms are renumbered. The commonly cited mappings, such as 80C becoming section 123 and Form 16 becoming Form 130, are reported in secondary sources and should be verified against the notified Rules.
- In force from
- 1 April 2026
- Tax year 2026-27 onwards
- Sections
- 536
- Against 819 effective sections in the 1961 Act
- Chapters and schedules
- 23 and 16
- Down from 47 chapters
- AY 2026-27 return due
- 31 Jul 2026
- Under the 1961 Act, belated by 31 Dec 2026
Why the Act was rewritten
The Income-tax Act 1961 had been amended by more than 60 Finance Acts and thousands of notifications. Sections carried letters and sub-letters, over 1,200 provisos and 900 explanations modified the main text, and the same word meant different things in different chapters. The Income-tax Bill 2025 was introduced in February 2025, examined by a Select Committee of Parliament, reintroduced with its recommendations in August 2025, passed by both Houses and received Presidential assent on 21 August 2025.
The stated goal was simplification without a change in policy. The new Act has 536 sections in 23 chapters and 16 schedules, roughly half the word count of the old law. Formulas and tables replace prose in many places, and the provisos and explanations have been folded into the main text. What the law taxes, at what rate, and who pays it are meant to stay the same.
Tax year replaces previous year and assessment year
The most visible change is vocabulary. Under the 1961 Act, income earned in the previous year 2025-26 is assessed in the assessment year 2026-27, a pairing that confuses first-time filers every July. The 2025 Act uses one term: tax year. A tax year is the twelve months from 1 April to 31 March. Income of tax year 2026-27 is reported in the return for tax year 2026-27, filed after 31 March 2027.
| Income earned in | 1961 Act terminology | 2025 Act terminology | Return filed |
|---|---|---|---|
| 1 April 2025 to 31 March 2026 | Previous year 2025-26, assessment year 2026-27 | Not applicable, old Act governs | By 31 July 2026 (31 October 2026 audit cases) |
| 1 April 2026 to 31 March 2027 | Would have been AY 2027-28 | Tax year 2026-27 | By 31 July 2027, under the 2025 Act |
| 1 April 2027 to 31 March 2028 | Tax year 2027-28 | By 31 July 2028 |
For a business or profession set up during the year, the tax year begins on the date of setting up and ends on 31 March. Forms, notices and challans for tax year 2026-27 will use the new term. Everything relating to AY 2026-27 and earlier keeps the old labels.
AY 2026-27 filings stay under the 1961 Act
Section 536 of the 2025 Act repeals the 1961 Act but saves everything already in motion under it. Returns for FY 2025-26, their processing under section 143(1), rectifications under 154, scrutiny under 143(2) and reassessment under 148 for any year up to AY 2026-27 all continue under the old Act and its section numbers. The e-filing utilities for AY 2026-27 use the 1961 Act forms: ITR-1 to ITR-7, Form 16, Form 26AS and the rest.
Nothing changes for the return you are filing this year
If you have not yet filed for FY 2025-26, file under the 1961 Act exactly as before: due date 31 July 2026 for non-audit cases and 31 October 2026 for audit cases, belated or revised by 31 December 2026 with the 234F fee of ₹5,000 (₹1,000 if income is up to ₹5 lakh). The new Act does not touch this return.
Reported section renumbering
Because provisions were regrouped, almost every section has a new number and several have been merged. Exemptions that lived in section 10 now sit in schedules, and TDS provisions that ran from 192 to 206 are consolidated into a small group of sections with tables. The mapping below is the one most often cited for the provisions individuals and small businesses use.
Verify before relying on these numbers
The section and form mappings in this guide are reported in secondary sources, including the Bill as passed and draft Rules released for consultation. Verify them against the notified Income-tax Rules 2026 and the final forms on the e-filing portal before quoting them in a return, a certificate or a contract.
| Provision | 1961 Act section | Reported 2025 Act reference |
|---|---|---|
| Deduction for PF, PPF, ELSS, life insurance, tuition fees and principal repayment | 80C | Section 123 |
| Deduction for health insurance premium and preventive check-ups | 80D | Section 126 |
| Additional NPS deduction of ₹50,000 over the 80C limit | 80CCD(1B) | Section 124(3) |
| Rent paid deduction where no HRA is received | 80GG | Section 134 |
| Interest on a housing loan against house property income | 24(b) | Section 22(1)(b) |
| House rent allowance exemption for salaried employees | 10(13A) | Schedule III |
| Rebate for resident individuals below the income threshold | 87A | Section 156 |
| The new tax regime and its slab rates | 115BAC | Section 202 |
| Presumptive taxation for small business | 44AD | Section 58 |
| Presumptive taxation for professionals | 44ADA | Section 58 |
| Compulsory tax audit above the turnover threshold | 44AB | Section 63 |
| Minimum alternate tax for companies | 115JB | Section 206 |
| Short-term capital gains on listed equity at 20% | 111A | Section 197 |
| Long-term capital gains on listed equity at 12.5% above ₹1.25 lakh | 112A | Section 198 |
| Virtual digital assets taxed at 30% with no set-off | 115BBH | Section 194 |
| Gains on specified mutual funds and market-linked debentures as short-term | 50AA | Section 74 |
| Exemption on sale of a residential house reinvested in a house | 54 | Section 82 |
| Exemption on sale of agricultural land reinvested in agricultural land | 54B | Section 83 |
| Exemption on reinvestment in NHAI and REC bonds within six months | 54EC | Section 85 |
| Exemption on sale of any long-term asset reinvested in a house | 54F | Section 86 |
| Updated return, ITR-U | 139(8A) | Section 263(6) |
| Defective return notice | 139(9) | Section 268(1) |
| Intimation after processing a return | 143(1) | Section 270(1) |
| Notice calling for information or a return | 142(1) | Section 270 |
| Scrutiny assessment notice | 143(2) | Section 280 |
| Reassessment of income escaping assessment | 148 and 148A | Section 281 |
| Interest for deferring advance tax instalments | 234C | Section 425 |
| Late filing fee of ₹1,000 or ₹5,000 | 234F | Section 428 |
| TDS on professional and technical fees | 194J | Section 393(1) |
| TDS on purchase of immovable property above ₹50 lakh | 194-IA | Section 393(1) |
| Limits on partner remuneration and interest in a firm | 40(b) | No direct equivalent listed |
The pattern to remember is that deductions from total income (the old chapter VI-A) now begin in the 120s, TDS and TCS sit in the 390s, and the return and assessment provisions are in the 260s to 280s. Software vendors and the department are expected to show both numbers during the transition.
Reported form renumbering
The forms prescribed under the Rules are also being renumbered in sequence, which affects the documents employees and businesses handle most. Draft Rules released for public comment carried the numbers below. They apply to documents relating to tax year 2026-27 and later, so the first Form 130 would be issued in 2027 for salary paid from April 2026.
| Document | Current form | Reported new form |
|---|---|---|
| Salary TDS certificate issued by an employer | Form 16 | Form 130 |
| TDS certificate for payments other than salary | Form 16A | Form 131 |
| TDS certificate for property purchase, issued by the buyer | Form 16B | Form 132 |
| Annual tax statement of TDS, TCS and tax paid | Form 26AS | Form 168 |
| Quarterly TDS return for salary | Form 24Q | Form 138 |
| Quarterly TDS return for payments other than salary | Form 26Q | Form 140 |
| Quarterly TDS return for payments to non-residents | Form 27Q | Form 144 |
| Quarterly TCS return | Form 27EQ | Form 143 |
| TCS certificate | Form 27D | Form 133 |
| Challan-cum-statement for TDS on property purchase | Form 26QB | Form 141 |
| Application for a TAN | Form 49B | Form 134 |
| Declaration by a non-resident claiming treaty benefit | Form 10F | Form 41 |
| Option to choose or leave the old regime | Form 10-IEA | Form 10-IEA |
| Challan for depositing TDS and TCS | ITNS 281 | ITNS 281N |
What does not change: slabs, rates and deductions
The 2025 Act is a consolidation, not a Budget. Tax rates are set every year by the Finance Act, and the new Act simply provides the framework into which those rates fit. The new regime remains the default, the old regime remains available by option, and the structure of deductions, exemptions and capital gains carries over.
- Slabs and rates: unchanged by the Act. The FY 2025-26 new regime slabs (0% to ₹4 lakh, 5% to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh, 30% above) and 4% cess come from the Finance Act, and rates for tax year 2026-27 come from the Finance Act 2026.
- Standard deduction of ₹75,000 under the new regime and ₹50,000 under the old regime, and the ₹60,000 rebate under 87A for income up to ₹12 lakh, continue under their new section numbers.
- Capital gains: 20% short-term and 12.5% long-term on listed equity with the ₹1.25 lakh exemption, 12.5% on property and other assets, 30% on virtual digital assets.
- Presumptive taxation limits of ₹2 crore (₹3 crore digital) under 44AD and ₹50 lakh (₹75 lakh digital) under 44ADA.
- Due dates, the 48-month updated return window, advance tax instalments and interest under 234A, 234B and 234C, in renumbered form.
- Old regime deductions: 80C ₹1.5 lakh, 80D, 80CCD(1B) ₹50,000, 24(b) ₹2 lakh interest on self-occupied property, HRA under 10(13A).
Worked example: Same salary, same tax, under both Acts
- Gross salary, new regime
- ₹18,00,000
- Less standard deduction
- ₹75,000
- Taxable income
- ₹17,25,000
- Tax: ₹4 to 8 lakh at 5%
- ₹20,000
- Tax: ₹8 to 12 lakh at 10%
- ₹40,000
- Tax: ₹12 to 16 lakh at 15%
- ₹60,000
- Tax: ₹16 to 17.25 lakh at 20%
- ₹25,000
- Tax before cess
- ₹1,45,000
- Cess at 4%
- ₹5,800
- Total tax under the 1961 Act for FY 2025-26
- ₹1,50,800
- Total tax under the 2025 Act for tax year 2026-27, if the Finance Act 2026 keeps these slabs
- ₹1,50,800
What actually changes in substance
Beyond numbering and language, a small number of practical changes were made during the drafting, several on the Select Committee recommendation. These are reported in the Act as passed and in commentary; check the final text for the exact wording.
- Refunds can be claimed in a return filed after the due date. The Bill as first introduced would have denied refunds on belated returns; the passed Act removed that restriction.
- A nil TDS certificate can be obtained by any deductee who expects no tax liability, rather than only a lower deduction certificate, reducing refund waits for pensioners and small earners.
- Deduction for commuted pension is extended to individuals receiving pension from a fund without being an employee.
- Deductions and exemptions are presented in tables with conditions in columns, which changes how eligibility is read but not what is allowed.
- The scope of "income" and "salary" definitions is consolidated in one place, and the term "receipt" replaces several overlapping phrases for money received.
- Search and survey powers include access to digital records and virtual digital spaces, a provision that drew comment during the committee stage and is retained in the Act.
Done for you
ITR for Salaried
Your AY 2026-27 return is filed under the 1961 Act with the FY 2025-26 rules. We prepare it, compare regimes on your actual numbers and note anything you should set up for the first year of the 2025 Act.
What taxpayers must do now
For most individuals the honest answer is nothing this year. File the FY 2025-26 return as usual, pay advance tax for tax year 2026-27 on the same dates, and keep the same records. The work begins in 2027, when the first returns and certificates under the new Act are due.
| Who | Now (2026) | Next year (2027) |
|---|---|---|
| Salaried employees | File AY 2026-27 return by 31 July 2026 under the 1961 Act | Expect Form 130 instead of Form 16 by June 2027; check the new form against payslips |
| Employers and deductors | Continue TDS deposits and 24Q/26Q filings under the old section numbers | Update payroll and TDS software for section 392 and 393 references, new form numbers and the tax year label |
| Businesses and professionals | File ITR-3 or ITR-4 for AY 2026-27; keep contracts referencing 194C or 194J as they are | Update TDS clauses in new contracts, audit report references and lower deduction certificate applications |
| Investors | No change to capital gains computation or reporting | Check that broker and RTA statements use tax year 2026-27 and new schedule references |
| Anyone with a pending notice | Reply under the 1961 Act procedure; deadlines and sections in the notice are unchanged | Notices for tax year 2026-27 onwards will cite the new sections |
Keep both numbers handy for a year
During 2027 you will see old and new section numbers side by side in Form 26AS, TRACES, broker statements and software. Keep a printed mapping for the ten sections you use most, and confirm each against the notified Rules once, rather than trusting a screenshot from a forum.
What to do next
If your FY 2025-26 return is not yet filed, file it now under the 1961 Act before 31 December 2026 to limit the late fee and interest. For tax year 2026-27, continue paying advance tax on 15 September, 15 December and 15 March, and keep records as usual. When the notified Rules and the new forms are published, we will update this guide with the verified section and form mappings; until then treat the tables above as a reading aid, not a citation.
Frequently asked questions
When does the Income-tax Act 2025 come into force?
From 1 April 2026, applying to tax year 2026-27 onwards. It received Presidential assent on 21 August 2025. Income earned up to 31 March 2026, including the return for AY 2026-27, is governed by the Income-tax Act 1961.
Do I file my AY 2026-27 return under the new Act?
No. The return for FY 2025-26 (AY 2026-27), due 31 July 2026 for non-audit cases and belated by 31 December 2026, is filed under the 1961 Act with the existing ITR forms, section numbers and Form 16.
What is a tax year under the Income-tax Act 2025?
The twelve-month period from 1 April to 31 March in which income is earned and for which the return is filed. It replaces both "previous year" and "assessment year". The first tax year is 2026-27, with returns due in 2027.
Does the new Income-tax Act change tax slabs or rates?
No. The Act does not alter slabs, the ₹75,000 standard deduction, the ₹60,000 rebate under 87A or capital gains rates. Rates are fixed each year by the Finance Act, so tax year 2026-27 rates come from the Finance Act 2026.
What is the new section number for 80C?
Section 123 of the 2025 Act, according to the Act as passed and secondary sources. The ₹1.5 lakh limit and eligible investments are unchanged. Verify the number against the notified Rules and forms before quoting it.
Will Form 16 be replaced?
Draft Rules reported that the salary TDS certificate becomes Form 130 for tax year 2026-27 onwards, so the first one would be issued by June 2027. Form 16 for FY 2025-26, issued by 15 June 2026, is unaffected.
Is the old tax regime abolished by the Income-tax Act 2025?
No. The new regime remains the default and the old regime with deductions such as 80C, HRA and 24(b) remains available by option, under renumbered sections. The choice rules for salaried and business taxpayers carry over.
What happens to a pending income tax notice after 1 April 2026?
It continues under the 1961 Act. Section 536 of the new Act saves all proceedings, assessments, appeals and recoveries relating to years up to AY 2026-27, so the section numbers and deadlines in your notice remain valid.
What should employers do to prepare for the new Act?
Nothing for the FY 2025-26 cycle. From the 2027 filing season, update payroll and TDS software for the new section references (392 for salary, 393 for other TDS), the new form numbers and the tax year label, and verify these against the notified Rules.
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Sections and forms mentioned
This guide is general information for FY 2025-26 and is not professional advice. Your assigned expert advises on your specific facts. Disclaimer