Income-tax Act 2025: Key Changes and the New Tax Year Concept

From 1 April 2026, India is taxing incomes under a brand-new law — the Income-tax Act, 2025 — which replaces the 65-year-old Income-tax Act, 1961. The rates and slabs you pay are unchanged; what changes is the language, the structure and, most visibly, the concept of a single Tax Year. Here is what the new Act means for taxpayers in practical terms.

Timeline: which law governs which year

The Income-tax Act, 2025 was passed in August 2025 and came into force on 1 April 2026. It applies to the tax year 2026-27 onwards. Earlier years remain governed by the 1961 Act, so both laws coexist for transition purposes.

Returns you filed for AY 2026-27 — including belated and revised filings up to 31 December 2026 — stay under the 1961 Act. The new Act first shapes the returns for tax year 2026-27, processed as AY 2027-28.

Tax Year replaces Previous Year and Assessment Year

The old law taxed income of a previous year (say, 1 April 2025 to 31 March 2026) in the following assessment year. The new Act collapses the two concepts into one Tax Year running from 1 April to 31 March — the twelve months in which you earn income is the same year in which you are assessed for it. The financial year itself does not change; only the legal labels around it do.

For taxpayers this removes the most common point of confusion: which year to write on forms and which year’s rates apply. Under the new law, income earned between 1 April 2026 and 31 March 2027 is simply tax year 2026-27, and the forms will align to that single-year language from AY 2027-28 onwards.

What has NOT changed

• Rates and slabs: the new Act does not alter tax rates — the slabs and the ₹12 lakh-level rebate structure announced for the new regime continue as they are.
• Deductions: deduction amounts and eligibility under the regime remain the same for now.
• PAN: the permanent account number continues to be the anchor of the system; nothing changes for existing PAN holders.
• TDS and TCS economics: thresholds and rates carry over; only the section numbers differ.

Renumbered sections and plain-English drafting

The new Act is drafted in plain English, with tables replacing long provisos and cross-references simplified. The chapter count has come down sharply and the text is noticeably shorter than the 1961 Act.

Section numbers have moved, and the shift matters most in deduction-at-source compliance: the TDS provisions now sit in the 390s series of the new Act, so the old Sections 192 to 194Q you know have new numbers from 1 April 2026. When you read a notice, challan or certificate issued after that date, cross-reference the new section against the 1961 Act number before reacting.

What taxpayers will actually notice day to day

• Terminology: forms, portal screens and notices start using Tax Year and new section numbers, in place of Previous Year/Assessment Year language.
• Form alignment: ITR forms and utilities will progressively align to the new Act from the tax year 2026-27 returns, filed during 2027 as AY 2027-28.
• No change in outgo: for most taxpayers, the tax payable on the same income does not change because of the new law itself.
• Parallel regimes: assessments and proceedings for years up to 2025-26 continue under the 1961 Act, so older section numbers remain in circulation.

During the transition, expect documents to cite both laws. An old demand notice may reference a 1961 Act section while a new form quotes the renumbered provision. Keeping a simple old-to-new section map handy — your consultant usually maintains one — prevents the wrong law being quoted in replies.

Key takeaways

• The Income-tax Act, 2025 took effect on 1 April 2026 for tax year 2026-27 onwards; earlier years stay under the 1961 Act.
• A single Tax Year (1 April to 31 March) replaces the previous year/assessment year split.
• Rates, slabs, deduction amounts and PAN continue unchanged — the reform is structural, not a rate change.
• TDS and TCS provisions are renumbered into the 390s series, with rates continuing as before.
• Your AY 2026-27 filings remain governed by the 1961 Act, including belated and revised returns until 31 December 2026.

Frequently asked questions

Does the new Act increase my tax for 2026-27?

No. The Income-tax Act, 2025 carries the same rates and slab structure as already announced for the new regime. The reform rewrites the law’s language and structure rather than raising or lowering taxes.

Which law applies to my return for AY 2026-27?

The Income-tax Act, 1961 governs income of FY 2025-26, filed as AY 2026-27 — including belated and revised returns up to 31 December 2026. The 2025 Act applies from tax year 2026-27, processed as AY 2027-28.

Is PAN changing under the new Act?

No. The permanent account number continues under the new Act exactly as before. Existing PANs, cards and portal logins remain valid.

Why do TDS sections now show numbers in the 390s?

The 2025 Act renumbered the entire law. Deduction-at-source provisions, earlier spread across Sections 192 to 206CA of the 1961 Act, now sit in the 390s series, with the same rates and thresholds.

How do I check my liability under the new law?

Compute it exactly as before with the income tax calculator, and compare the two regimes with the old vs new regime tool. For transition questions on older assessments, an income tax consultant can map old sections to the new numbering.

Disclaimer: Tax laws change frequently. Verify current rates and deadlines on the official portals (incometax.gov.in, gst.gov.in) or consult a qualified professional before acting.