The Income-tax Act, 2025 is here: what actually changes for you
From 1 April 2026 the 1961 Act is replaced. The rates you pay don't change much, but the vocabulary and section numbers you know do.
India’s income tax law was rewritten for the first time in more than six decades. The Income-tax Act, 2025 replaces the Income-tax Act, 1961 and applies from 1 April 2026.
The short version
For most taxpayers, how much tax you pay does not change because of the new Act itself. It is mainly a simplification exercise: shorter language, fewer cross-references and the removal of provisions that no longer matter.
What is different
“Tax year” replaces “previous year” and “assessment year”. Under the old law you earned income in FY 2025-26 but it was assessed in AY 2026-27, which confused nearly everyone. The new Act uses one term, the tax year, for the year in which you earn the income.
Section numbers have changed. Familiar references such as 80C, 87A and 194J have new numbers. Expect forms, Form 16 and software to show the new references while professionals keep using the old ones in conversation for a while.
Tables instead of long provisos. TDS rates, deductions and exemptions are now grouped in tables and schedules, which makes them easier to look up.
What this means for you
- Salaried individuals: choose your regime, keep your investment proofs and file on time, as before. Your employer’s payroll will start using the new terminology.
- Businesses: check that your accounting and TDS software has been updated, and that invoices and contracts which mention specific sections still refer to the right provisions.
- Past years: returns, assessments and notices for years before 1 April 2026 continue under the 1961 Act.
Tip: if you receive a notice that quotes a section you don’t recognise, check which Act it refers to before replying.
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