Income-tax Act 2025: What Changes From 1 April 2026 (and What Does Not)

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.

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.

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.

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.

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).

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.

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.

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.