The Big Picture
The Income-tax Act, 2025 came into force on 1 April 2026 and replaces the Income-tax Act, 1961. It applies from tax year 2026-27 onwards. The 1961 Act continues to govern tax year 2025-26 and earlier years, including notices, assessments and appeals for those years.
The government's stated aim was to simplify the language and structure, not to make major policy changes. For most taxpayers, the way income is calculated remains broadly familiar.
What Has Changed
1. "Tax year" replaces previous year and assessment year
The confusing pair of "previous year" (when you earn) and "assessment year" (when you are assessed) is replaced by a single tax year, generally the financial year from April to March.
2. A much shorter law
The new Act has about 536 sections in 23 chapters, compared with over 800 sections in 47 chapters earlier. Hundreds of provisos and explanations have been converted into simpler sub-sections.
3. New section numbers
Familiar section numbers have changed. For example, provisions earlier known by numbers such as 44AB (tax audit), 139 (return filing), 80G (donations) and 12AB (trust registration) now carry new numbers. The Income Tax Department has published an official mapping of old and new sections.
4. Tables and formulas
Many rules, such as TDS rates and due dates, are now set out in tables and formulas instead of long paragraphs.
5. TDS and TCS consolidated
TDS and TCS provisions spread across dozens of sections have been brought together into a small number of sections, with rates in tables.
6. Charitable trusts
Provisions for trusts and institutions are consolidated, and registered entities are called Registered Non-Profit Organisations. Existing valid registrations generally continue. See Trust Registration.
7. New forms and rules
New Income-tax Rules and revised forms accompany the Act, so form names and numbers you are used to may change.
What Has Not Changed (Broadly)
- Residential status tests based on days of stay. See Resident to NRI.
- The five heads of income: salary, house property, business or profession, capital gains and other sources
- The overall approach to deductions, exemptions and tax regimes, subject to the annual Finance Act
- The powers of the Assessing Officer and the broad assessment framework
What You Should Do
- For tax year 2025-26 returns (filed in 2026), the old Act applies. Do not mix up old and new section numbers.
- Businesses: update accounting software, TDS processes and invoice templates for new references and forms.
- Trusts and NGOs: check registration validity and renewal dates under the new framework.
- Everyone: keep good records. Notices for older years will still cite the 1961 Act.
Frequently Asked Questions
Does the new Act change income tax rates?
Rates are set by the annual Finance Act. The new Act itself was designed mainly as a simplification, not a rate change.
Which law applies to my return filed in July 2026?
That return is for financial year 2025-26, which is governed by the Income-tax Act, 1961.
Do trusts need to register again?
Entities with valid registrations generally continue without fresh registration, but renewals and new applications follow the new provisions.
Related Services
Talk to a Chartered Accountant
If you want to understand how the new Income-tax Act, 2025 affects your return, business or trust, contact us for detailed guidance.
CA Mayank Agarwal (Chartered Accountants)
Raj Nagar Extension & Indirapuram, Ghaziabad
Phone / WhatsApp: 9718877122 | Email: fcamayankagarwal@gmail.com
This page gives general information for guidance only. Laws, forms, fees and timelines change from time to time and depend on individual facts, so please confirm the current position before acting. See all our service guides.