India’s Income-tax Act, 1961 has been replaced by the Income-tax Act, 2025, which came into force on 1 April 2026. After more than six decades and hundreds of amendments, the old law had become long and hard to follow. The new Act aims to make tax law simpler to read, not to change how much tax you pay.
What has changed
- “Tax Year” replaces “Previous Year” and “Assessment Year.” Income earned between 1 April 2026 and 31 March 2027 now belongs to Tax Year 2026-27. The confusing two-year labelling is gone.
- Shorter, simpler law. Obsolete provisions have been removed, and the remaining sections have been renumbered and rewritten in plainer language.
- Tables and formulas. Many provisions, such as TDS rates and deductions, are now presented in tables, which makes them easier to look up.
- New section numbers. Familiar references like “Section 80C” or “Section 194J” now have new numbers. Forms, certificates and agreements will gradually move to the new references.
What has not changed
- Tax rates and slabs are still set by the annual Finance Act. The new law does not by itself increase or reduce your tax.
- Returns for FY 2025-26 (filed during 2026) still follow the 1961 Act. The new Act applies from Tax Year 2026-27 onwards.
- Core concepts such as residential status, heads of income, TDS/TCS and advance tax continue, now under the new structure.
What you should do now
- Businesses: update accounting and payroll software, TDS mapping and invoice templates to the new section references.
- Salaried individuals: check with your employer that Form 16 and investment declarations follow the new format.
- Contracts and agreements: review any clauses that mention sections of the 1961 Act.
- Advance tax: plan instalments for Tax Year 2026-27 as usual. The due dates and the need to pay have not gone away.
How KKKD & Co. can help
Our team is helping clients move smoothly to the new law, from updating TDS processes to year-end tax planning. Contact us for a consultation.
This article is for general information only and is not professional advice. Please consult a qualified Chartered Accountant for your specific situation.