India’s Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026. It applies to income earned from Tax Year 2026–27 onwards. The biggest visible change is a single “tax year” in place of “previous year” and “assessment year”, but the new Act is mainly a rewrite of structure and language rather than a new tax system.
The key facts
- Law: Income-tax Act, 2025 (Act 30 of 2025), Presidential assent 21 August 2025.
- In force: 1 April 2026.
- Simpler structure: the number of sections falls from over 800 to 536, in 23 chapters.
- Tax year: income earned from 1 April 2026 to 31 March 2027 is Tax Year 2026–27. “Assessment year” and “previous year” are discontinued.
What doesn’t change yet
Income earned up to 31 March 2026 still falls under the 1961 Act. Returns filed in 2026 for FY 2025–26 use the old law, its section numbers and its terms. The new Act’s terminology and forms apply from Tax Year 2026–27.
What businesses should update
- Section references. TDS certificates, agreements, invoices and internal policies that quote 1961 Act sections will need the new references for transactions from 1 April 2026.
- Accounting and payroll software. Check your Tally, Zoho Books or payroll system has been updated for the new Act’s forms and references.
- Year labels. Replace “AY” and “PY” in schedules and reports with the tax year.
- Two systems in parallel. For a while you will deal with the old Act for past years and the new Act for current income. Keep the references separate.
What NRIs should know
The basic charge to tax and residency concepts carry over, so most NRIs will see little change in what is taxed. Expect new form layouts and section numbers from Tax Year 2026–27, and check that your Indian bank, tax deductors and adviser are using the right references.
Rates are a separate question
The new Act sets the framework; rates and slabs are still set through each year’s Finance Act and budget. Check the current year’s rates rather than assuming they changed with the new law.
Source: Income-tax Act, 2025; Income Tax Department.
Last reviewed: October 2026. This article is general information, not advice for your specific situation. Rules change; check the official source or speak to us before acting.
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