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Income Tax · New lawNew Income-tax Act, 2025: what has changed for you
From 1 April 2026 India taxes income under the Income-tax Act, 2025. The rates did not change, but the language, section numbers and forms did. Here is a plain guide to Tax Year, the new sections, Form 130, salary allowances and how old years are handled.
By CA Dilbagh Singh, Chartered Accountant, Rohini, Delhi · Published 7 November 2026
The Income-tax Act, 1961 governed Indian income tax for over 60 years. From 1 April 2026 it has been replaced by the Income-tax Act, 2025, along with the new Income-tax Rules, 2026. The government's stated aim is simplification – no new tax, but shorter law, plainer language and tables in place of long provisos.
For most taxpayers the money does not change. What changes is the vocabulary on your notices, Form 16, challans and returns. This guide explains what to expect.
The new law in numbers
Shorter ActIncome-tax Rules, 2026One year conceptNo new taxTax Year replaces Previous Year and AY
Earlier, income of FY 2025-26 was assessed in AY 2026-27 – a source of endless confusion. Under the new Act there is only the Tax Year: the 12-month financial year in which income is earned.
- Tax Year 2026-27 = 1 April 2026 to 31 March 2027. Its return will be filed in 2027.
- A new business or source of income started mid-year has a shorter first tax year, from the start date to 31 March.
- For old years, the Act reads a "tax year" as the corresponding "previous year" – so tax year 2024-25 means previous year 2024-25 (AY 2025-26).
- Your books of account and financial year do not change.
Some section numbers you will see
Professionals have to relearn section numbers. A few important ones confirmed in the official FAQs:
- New tax regime (old 115BAC) – now Section 202. It remains the default regime; you can still opt out.
- Presumptive taxation (old 44AD, 44ADA, 44AE) – merged into Section 58, in table form.
- TDS provisions (old 192 to 194 series) – brought together in a tabular TDS section; for example TDS on contractors (old 194C) is now under Section 393.
- Repeal and savings – Section 536 keeps old-year proceedings, approvals and circulars alive where not inconsistent.
The Income Tax Department has published a section-wise mapping on the e-filing portal. Cite the new section on documents for Tax Year 2026-27 and the old section for earlier years.
What changes for salaried employees
- Form 130 replaces Form 16 – the annual TDS certificate from your employer, generated through TRACES.
- Form 124 replaces Form 12BB – the declaration of rent, investments and loans you give your employer. Landlord details are needed for HRA claims.
- HRA at 50% for more cities – along with Delhi, Mumbai, Kolkata and Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad are treated as metro cities in the new Rules (old regime only).
- Higher tax-free allowances (old regime) – children's education allowance up to ₹3,000 per child per month, hostel allowance up to ₹9,000 per child per month, and meal vouchers up to ₹200 per meal.
- Regime choice continues – the new regime stays default. See our tax slabs for Tax Year 2026-27 to compare.
What happens to old years and pending cases?
- Return for FY 2025-26 – filed under the 1961 Act and old forms. Belated or revised returns for that year also follow the old law; see our belated and revised ITR guide.
- Assessments, reassessments, appeals and penalties for years up to FY 2025-26 continue under the 1961 Act, through the savings clause.
- Advance tax for Tax Year 2026-27 is paid under the new Act – see our advance tax guide.
- PAN, TAN, registrations and approvals already granted continue.
- Notices may now quote either Act depending on the year involved. Read the year and section carefully – our guide to income-tax notices helps.
What businesses should do now
- Update invoice, agreement and ERP references from old sections (194C, 194J, 44AD) to the new ones from 1 April 2026.
- Check TDS software and challans for the new section codes for Tax Year 2026-27.
- Tax audit for Tax Year 2026-27 will be under the new Act and its new forms – see our tax audit guide for the current year's rules.
- Keep two sets of references in files for the transition year – old Act for FY 2025-26, new Act for Tax Year 2026-27.
General information as on 7 November 2026, based on the Income-tax Act, 2025, the Income-tax Rules, 2026 and the department's FAQs. Specific figures and forms should be checked against the notified text before use.
Official references
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
From when does the Income-tax Act, 2025 apply?
From 1 April 2026. Income earned from 1 April 2026 (Tax Year 2026-27) is taxed under the new Act. The Income-tax Act, 1961 stands repealed from that date, subject to savings for earlier years.
What is Tax Year 2026-27?
The 12-month financial year from 1 April 2026 to 31 March 2027. The new Act uses "tax year" in place of "previous year" and drops the term "assessment year".
Under which Act do I file my return for FY 2025-26?
Under the Income-tax Act, 1961, using the old forms, because that income relates to a year before 1 April 2026. The first return under the new Act will be for Tax Year 2026-27.
Has Form 16 been discontinued?
Under the Income-tax Rules, 2026 the salary TDS certificate is Form 130, which replaces Form 16 for Tax Year 2026-27 onwards. Form 124 replaces Form 12BB for employee declarations.
Have tax rates changed under the new Act?
No. The new Act is a rewrite in simpler language; the slab rates, the ₹12 lakh rebate limit under the new regime and the standard deduction continue.
Have a tax, GST or business question?
Call, WhatsApp or email CA Dilbagh Singh and team, from Delhi, anywhere in India or abroad.