After sixty-four years, India has a new income tax law. The Income-tax Act, 2025 was passed by Parliament in August 2025 and came into force on 1 April 2026, replacing the Income-tax Act, 1961 in full. If that sentence makes you nervous, the first thing to know is reassuring: this was a rewrite of the language, not of your tax bill. The second thing to know is that the details still matter, because every notice, form and reference you see from now on cites the new section numbers.
Why the law was replaced
The 1961 Act had been amended by every Finance Act for six decades. It had grown to hundreds of sections wearing letters like 115BAC and 194-IB, with provisos stacked on provisos, and even professionals navigated it by habit rather than by reading. The 2025 Act reorganises the same law into fewer, cleaner sections, replaces long paragraphs with tables where a table was always the honest format, and removes provisions that had been dead for years. The government's stated intent was simplification without substantive change, and for the overwhelming majority of taxpayers that is what it delivers.
The “tax year” replaces PY and AY
The most visible change is vocabulary. The old law taxed the income of a “previous year” in an “assessment year” — a pairing that has confused every first-time filer since 1961, because the return for the year ended March 2026 was filed in “AY 2026-27”. The new Act drops the pair entirely and works with a single tax year: the twelve months from April to March in which you earned the income. What you earn in the tax year 2026-27 is taxed as the tax year 2026-27. Forms, portals and challans are being relabelled accordingly, and the old AY dropdowns will fade out as earlier years are closed.
What does not change
- Slab rates and the new-regime default carry over as they stood — the Act did not reprice anyone's tax.
- The filing calendar holds: the non-audit due date remains 31 July following the tax year unless extended.
- TDS obligations, advance-tax instalments, and presumptive schemes continue with the same thresholds and rates they had on 31 March 2026.
- Everything already filed under the 1961 Act stays governed by it — old assessments, old appeals and old refunds do not migrate.
What actually needs your attention
Section numbers on notices. A notice issued after 1 April 2026 cites the new Act. The intimation you knew as 143(1) and the scrutiny notice you knew as 143(2) have new addresses, and a reply that cites the wrong statute reads as carelessness. Before you respond to anything, map the section — or have someone do it who does this daily.
Documents that quote the old law. Loan covenants, engagement letters, salary structures and partnership deeds often name specific sections — 44AD, 194C, 80G. Those references now point at a repealed Act. Nothing breaks overnight, because the new Act carries a mapping, but the next time each document is touched it should be updated.
Software and templates. Payroll software, invoice formats that mention TDS sections, and internal checklists all need the renumbering applied once. Most vendors shipped this in their April 2026 updates; if your accountant maintains templates by hand, ask when they were last revised.
Filing this season? See how we handle returns under the new Act →
The first filing season under the new Act
The season now open covers income earned in FY 2025-26 — a year that ran under the old Act — so this is a transition season: old-law computations presented through forms that are adopting new-law vocabulary. It is exactly the kind of year in which small mismatches multiply. Reconcile your 26AS and AIS before filing, check that TDS credits landed under the right head, and do not assume a prefilled figure is right because it is prefilled.
If you want the transition handled rather than studied, The Consulting Crew files returns for businesses and professionals every season and has been working under the new Act since the day it commenced. Get in touch and we will take it from there.
This article is general information, not tax advice. Rules, limits and rates can change; confirm the current-year specifics for your business before acting.