Income Tax Act 2025: What Changed From 1 April 2026

India’s tax law has shifted to the Income Tax Act 2025 from 1 April 2026, replacing the 1961 Act for the new tax year. Retail taxpayers face simpler terminology and renumbered sections, but no change in tax rates, deductions or relief limits; older returns remain under the previous law.

The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961. It is already the law you are living under. The number of sections falls from 819 to 536, “Assessment Year” and “Previous Year” are replaced by a single “Tax Year”, and the section numbers you have memorised for years have changed.

What has not changed is how much tax you pay. This was a rewrite for readability, not a rate revision, and that is the single most useful thing to understand about it.

What actually happened, and when

The Act states that it “shall come into force on the 1st April, 2026”. From that date the 1961 Act is repealed.

The repeal is not retrospective. The 1961 Act continues to govern every tax year that began before 1 April 2026, which means anything you file now for FY 2025-26 is still a 1961 Act return. The new Act governs the year that began on 1 April 2026 and everything after.

So there are two statutes running side by side for a while, applying to different periods. That is normal for a transition of this size, and it is the reason you will keep seeing both section numbering systems quoted for the next couple of years.

The three changes you will actually notice

1. “Tax Year” replaces two confusing terms

The old law had you earning income in a Previous Year and being assessed in an Assessment Year, so income earned in 2025-26 was assessed in AY 2026-27. Two names for two overlapping periods, and a permanent source of error on filing portals.

The new Act uses one term: Tax Year. Income earned in a tax year is taxed for that tax year. If you have ever picked the wrong year in a dropdown and had to revise, you already understand why this was worth doing.

2. The section numbers changed

This is the change with the most day-to-day friction. The provisions you know by number now sit elsewhere. The health insurance deduction, for instance, moves from Section 80D to Section 126, carrying the same limits.

Nothing about the relief changes. The amount you can claim, the conditions, the senior citizen enhancement: all identical. Only the label is different.

The practical consequence is that older guidance and newer guidance will refer to the same relief by different numbers, and you need to recognise them as one thing rather than two. When you read anything about Indian tax over the next two years, check which Act it is written against.

3. The statute is shorter

From 819 sections to 536. The reduction comes mostly from consolidating provisions scattered across decades of amendments, removing provisions that had become obsolete, and replacing long cross-referenced prose with tables.

You will feel this only if you read the bare Act. But it matters indirectly: a large share of tax disputes have historically turned on genuinely ambiguous drafting, and a cleaner statute produces fewer of those over time.

What did NOT change

Worth stating plainly, because a rewrite of this size invites the assumption that everything is different.

• Slab rates. The rewrite did not itself set new rates. Rates come from the Finance Act each year, as they always have.
• The old and new regime choice. Both still exist, and the calculation you should run before choosing is the same one.
• Your deductions. HRA, 80C-type investments, health insurance, home loan interest and employer NPS all survive with their existing conditions, under new numbers.
• Capital gains treatment. The 12.5% and 20% rates introduced in July 2024 continue.
• Filing mechanics. Same portal, same forms, same Form 26AS and AIS reconciliation.

What to actually do about it

1. Nothing urgent. There is no registration, no election, no form to file because of the new Act. This is not a transition you opt into.
2. Stop quoting section numbers from memory. If you are writing anything down for your own records, note the relief by name rather than by number until the new numbering settles.
3. Check the vintage of any guide you read. An article written in 2024 describing “Section 80C” is not wrong about the relief, but it is describing the old numbering.
4. Expect your filing software to handle it. The portal and the major filing tools carry the mapping. This is one of the few tax changes where the tooling genuinely does the work for you.
5. If you are mid-dispute, get advice. Proceedings that began under the 1961 Act continue under it. This is the one area where the transition has real complexity, and it is not a do-it-yourself question.

The part that is genuinely uncertain

Two things are worth watching rather than assuming.

First, case law. Decades of judicial interpretation attach to the 1961 section numbers. Where the new Act reproduces a provision in substance, that interpretation should carry across. Where the drafting has been tightened, it is an open question how much of the old reasoning survives. That will take years of litigation to settle.

Second, TDS and TCS renumbering. These sections are quoted on challans, in vendor contracts and in payroll systems. Renumbering them means a lot of operational plumbing has to be updated by a lot of organisations, and mismatches during the changeover are a predictable source of notices. If you are a freelancer or run a small business, check that the TDS section quoted on the certificates you receive matches what your clients are actually depositing.

Common questions

When did the Income Tax Act 2025 come into force?
1 April 2026. From that date it replaces the Income-tax Act, 1961.

Does the new Act change my tax rate?
No. It is a structural rewrite. Rates continue to be set by the annual Finance Act.

What is a Tax Year under the new Act?
A single term replacing both “Previous Year” and “Assessment Year”. Income earned in a tax year is taxed for that tax year.

Which Act applies to the return I am filing now?
For any tax year that began before 1 April 2026, the 1961 Act continues to apply. The new Act governs periods from 1 April 2026 onward.

How many sections does the new Act have?
536, down from 819 in the 1961 Act.

Has Section 80D been removed?
No. The health insurance deduction continues with the same limits, renumbered as Section 126.

Do I need to do anything because of the new Act?
No. There is no election, registration or form required. The change is automatic.

The short version

The Income-tax Act, 2025 has been in force since 1 April 2026. It is shorter, it uses one “Tax Year” instead of two overlapping year concepts, and it renumbers the sections you know. It does not change what you owe, which deductions exist, or how you file. The 1961 Act still governs everything before 1 April 2026, so both will be quoted for a while. The only real risk to an ordinary taxpayer is reading old guidance and new guidance side by side and mistaking one relief for two.