Income Tax Act 2025 — Effective from 1 April 2026
India's Income Tax Act, 1961 — a law that governed direct taxation for over six decades — has been officially repealed. The Income Tax Act, 2025 came into force on 1 April 2026. While this is the most significant structural overhaul of Indian tax law since Independence, there is no reason to panic. Here are five clarifications that matter most right now.
Clarification 1 — Your July 2026 ITR Will Still Be Filed Under the Old Act
This is the single most important point that is causing widespread confusion.
The income tax return for FY 2025-26 (April 2025 to March 2026) — which will be filed in July 2026 — will continue to be governed by the Income Tax Act, 1961. The old form numbers, old section references, old terminology — everything remains the same for this filing.
The Income Tax Act, 2025 will apply for the first time to Tax Year 2026-27, meaning the return you file in July 2027.
What this means for you: If you are a salaried employee, a business owner, or a professional — you do not need to learn anything new for your upcoming July 2026 filing. Your employer, CA, and tax software will handle this filing exactly as before.
Clarification 2 — "Assessment Year" Has Been Abolished. There Is Now Only a "Tax Year"
The Income Tax Act, 2025 has eliminated the long-standing and confusing dual-year framework of Previous Year and Assessment Year. In its place, a single concept called the Tax Year has been introduced.
Under the old framework, taxpayers had to remember two separate years:
- FY 2024-25 — the year in which income was earned (Previous Year)
- AY 2025-26 — the year in which the return was filed (Assessment Year)
Under the new framework, Tax Year 2026-27 refers to the period from April 2026 to March 2027. Income earned during this period will be filed in July 2027 — all under one unified label.
Practical impact: This change takes effect from Tax Year 2026-27. For filings due in July 2026, the old AY/PY terminology continues to apply.
Clarification 3 — Tax Rates Have Not Changed
A common misconception is that the new Act has altered income tax rates or slabs. This is incorrect.
The Income Tax Act, 2025 is a structural and drafting reform, not a tax policy change. Tax slabs, deduction limits, exemption thresholds, and the availability of both the New Tax Regime and the Old Tax Regime remain entirely unchanged.
Income up to Rs. 12 lakh continues to be effectively tax-free under the New Tax Regime (default regime) by virtue of the rebate under the applicable provision. No new taxes have been introduced and no existing deductions have been withdrawn through this legislation.
Clarification 4 — Section Numbers Have Changed. The Rules Have Not.
The Income Tax Act, 2025 has renumbered and reorganised all provisions into 536 sections across 23 chapters — down from 819 sections and 47 chapters in the 1961 Act. The substance of most provisions remains identical; only the section numbers are different.
Some commonly referenced section equivalents:
| Old Section (ITA 1961) | New Section (ITA 2025) | Subject |
|---|---|---|
| Section 4 | Section 4 | Charge of Income Tax |
| Section 10 | Section 11 | Incomes Not Included in Total Income (Exemptions) |
| Section 80C | Section 123 | Deductions — LIC, PPF, ELSS etc. |
| Section 194C / 194J | Section 393 | TDS — Contractors & Professional / Technical Fees (consolidated) |
| Section 148 | Section 279 | Income Escaping Assessment |
| Section 143(1) | Section 270 | Processing of Return & Intimation |
Important: Your PAN, TAN, and all prior assessments remain fully valid. No re-registration, no fresh applications, no action required on account of this change alone.
Clarification 5 — Form Numbers Have Been Renumbered
Along with section numbers, the form numbers prescribed under the Income Tax Rules have also been revised under the Income Tax Rules, 2026. Key forms that taxpayers and practitioners commonly use:
| Old Form (ITA 1961 / Rules 1962) | New Form (ITA 2025 / Rules 2026) | Purpose |
|---|---|---|
| Form 16 | Form 130 | TDS Certificate — Salary |
| Form 15G / Form 15H | Form 121 | Declaration for No TDS Deduction |
| Form 26AS | Form 387 | Annual Tax Credit Statement |
| Form 16A | Form 131 | TDS Certificate — Non-Salary Payments |
| Form 12BB | Form 124 | Investment / Deduction Declaration to Employer |
Note: These new form numbers will be relevant from Tax Year 2026-27 onwards. For the return filing due in July 2026, the old form numbers (Form 16, Form 15G/15H etc.) continue to apply. Your employer and bank will issue certificates in the old format for FY 2025-26.
In Summary — What Do You Need to Do Right Now?
- July 2026 ITR filing: No change. Same process, same forms, same section references as before.
- TDS deductors: FY 2025-26 TDS returns will continue to reference old section numbers (194C, 194J etc.).
- PAN / TAN / prior assessments: Fully valid. No action required.
- Tax planning for FY 2026-27: Rates and deductions unchanged. Plan as before.
- First filing under ITA 2025: July 2027 — you have over a year to familiarise yourself with the new form numbers and section references.
The Income Tax Act, 2025 is a genuine and welcome simplification of a law that had become unwieldy over six decades. The transition is designed to be smooth, with all rights, obligations, and prior assessments carried forward under the new framework. The practical impact for most taxpayers will be felt only from FY 2026-27 onwards.
Disclaimer: This update is for informational purposes only and does not constitute legal or tax advice. For matters specific to your tax situation, consult a qualified tax professional or ask a free question on Taxation360.