Income-tax Act, 2025: what changed for individuals from 1 April 2026
- November 12, 2026
- Posted by: kirit.topgstexperts
- Category: Income Tax
For most individuals, the Income-tax Act, 2025 changes the language and the section numbers, not the tax bill. It replaced the Income-tax Act, 1961 from 01.04.2026, and the government has said it imposes no new tax. What you will notice is a new “tax year”, renumbered sections and new form numbers.
Which law applies to which year
The new Act governs income earned from 01.04.2026 onwards. Anything relating to earlier years stays with the old law.
| Period of income | Governing law | How it is labelled |
|---|---|---|
| FY 2025-26 and earlier | Income-tax Act, 1961 | Assessment year (AY 2026-27 and earlier) |
| FY 2026-27 onwards | Income-tax Act, 2025 | Tax year (tax year 2026-27 onwards) |
So the return you filed in 2026 for income of FY 2025-26 was an AY 2026-27 return under the 1961 Act, using the old ITR forms. Your first return under the new Act will be for tax year 2026-27, and it falls due only in 2027.
The bridge between the two laws is section 536 of the IT Act, 2025, the repeal and savings clause. Under it, pending and future proceedings for years before 01.04.2026 continue under the 1961 Act. That includes scrutiny under section 143(2) and reassessment under sections 147 to 151 of the IT Act, 1961. A notice for AY 2024-25 received today is therefore still answered under the old law.
The new structure at a glance
The new Act is shorter and arranged more logically, with many provisos and explanations turned into tables.
| Feature | IT Act, 1961 | IT Act, 2025 |
|---|---|---|
| Sections | 819 | 536 |
| Schedules | 14 | 16 |
| Rules (Income-tax Rules) | 511 rules, 399 forms | 333 rules, 190 forms (Income-tax Rules, 2026) |
| Period of income | Previous year, taxed in the following assessment year | Tax year |
The Act received Presidential assent on 21.08.2025 as Act No. 30 of 2025. The Income-tax Rules, 2026 were notified on 20.03.2026.
“Tax year” replaces previous year and assessment year
Under the old law, income of FY 2025-26 was the “previous year” and it was assessed in “AY 2026-27”. Two labels for one year often confused taxpayers. The new Act uses a single term: income of FY 2026-27 is simply “tax year 2026-27”.
A tax year normally runs from 1 April to 31 March. A new business or a new source of income can have a shorter first tax year. For example, a business started on 01.12.2026 has its first tax year from 01.12.2026 to 31.03.2027. You do not need to change your accounting year.
New section numbers you will see
Almost every familiar section has a new number. The table lists the ones individuals use most.
| What it covers | IT Act, 1961 | IT Act, 2025 |
|---|---|---|
| New tax regime (default) | Section 115BAC | Section 202 |
| Rebate for resident individuals | Section 87A | Section 156 |
| Standard deduction and tax on employment (salary) | Section 16 | Section 19 |
| PF, life insurance, ELSS, etc. (limit ₹ 1,50,000) | Section 80C | Section 123 |
| Health insurance premium | Section 80D | Section 126 |
| Presumptive income (business, profession, goods carriages) | Sections 44AD, 44ADA, 44AE | Section 58 |
| Return of income | Section 139 | Section 263 |
| TDS on salary | Section 192 | Section 392 |
| TDS on other payments (contracts, rent, interest, fees, etc.) | Sections 193 to 194T | Section 393 |
The limits themselves are carried over. The deduction for PF, insurance and similar savings is still capped at ₹ 1,50,000 a tax year, now under section 123 read with Schedule XV. The health-insurance deduction under section 126 still allows ₹ 25,000 for self and family and ₹ 25,000 for parents, rising to ₹ 50,000 for a senior citizen.
Tax rates, rebate and standard deduction
The slab rates under the new regime are the same as last year. Budget 2026 did not change them. Under section 202(1), the rates for individuals are:
| Total income (₹) | Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Health and education cess at 4% applies on top. Two other figures carry over unchanged:
- Rebate under section 156: a resident individual in the new regime whose total income does not exceed ₹ 12,00,000 gets a rebate of up to ₹ 60,000, so no tax is payable. Just above ₹ 12,00,000, marginal relief ensures the tax does not exceed the income above that limit. In the old regime, the rebate is up to ₹ 12,500 for total income up to ₹ 5,00,000.
- Standard deduction under section 19: ₹ 75,000 for salaried individuals in the new regime and ₹ 50,000 in the old regime.
Worked example: salaried individual, tax year 2026-27, new regime
Assume a resident individual below 60 with only salary income and no other deductions.
| Particulars | Case A | Case B | Case C |
|---|---|---|---|
| Gross salary (₹) | 12,75,000 | 12,90,000 | 13,50,000 |
| Less: standard deduction, section 19 (₹) | 75,000 | 75,000 | 75,000 |
| Total income (₹) | 12,00,000 | 12,15,000 | 12,75,000 |
| Tax at slab rates (₹) | 60,000 | 62,250 | 71,250 |
| Less: rebate / marginal relief, section 156 (₹) | 60,000 | 47,250 | Nil |
| Tax after rebate (₹) | Nil | 15,000 | 71,250 |
| Add: cess at 4% (₹) | Nil | 600 | 2,850 |
| Tax payable (₹) | Nil | 15,600 | 74,100 |
In Case B, income is ₹ 15,000 above ₹ 12,00,000, so the tax before cess is limited to ₹ 15,000. In Case C, slab tax of ₹ 71,250 is lower than the excess income of ₹ 75,000, so no marginal relief applies. You can test your own figures on our income tax calculator.
Old regime or new regime: your choice carries over
The new regime under section 202 remains the default. You can still opt out and use the old regime with its deductions such as section 123, section 126 and house-property interest.
- If you have no business income, you choose the regime each year in your return.
- If you have business or professional income, the option must be exercised by the return due date. It continues for later years and can be withdrawn only once.
- An option exercised under the 1961 Act is treated as made under the matching provision of the new Act. You do not need to opt again.
New form numbers for everyday compliance
The Income-tax Rules, 2026 renumber many forms. For tax year 2026-27 onwards:
| Purpose | Old form | New form |
|---|---|---|
| Salary TDS certificate from employer | Form 16 | Form No. 130 |
| No-TDS declaration for interest, etc. | Form 15G / 15H | Form No. 121 |
| Lower or nil TDS certificate application | Form 13 | Form No. 128 |
| Annual Information Statement | AIS | Form No. 168 |
| Salary arrears relief | Form 10E | Form No. 39 |
| PAN application (Indian individual) | Form 49A | Form No. 93 |
Your existing PAN stays valid. Form 16 still applies for salary of FY 2025-26; Form No. 130 for tax year 2026-27 is due from employers by 15.06.2027.
What stays the same
- No new tax. The government has said the tax policy is unchanged.
- PAN, TAN and the faceless assessment and appeal system continue.
- Advance tax for tax year 2026-27 follows the familiar instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. It applies if your tax for the year is ₹ 10,000 or more.
- Losses determined under the 1961 Act carry forward into the new Act for the remaining period. The clock does not restart.
- Refunds due under the old law, and old approvals and registrations, remain valid.
Practical checklist
- Tell your employer which regime you want for tax year 2026-27, so TDS under section 392 is correct.
- Give your bank the new Form No. 121 instead of Form 15G/15H, if you qualify.
- For any notice, check the year first: AY 2025-26 and earlier means the 1961 Act.
- Use the new section numbers in fresh declarations and proofs from 01.04.2026.
- Keep FY 2025-26 papers (Form 16, AIS) separately from tax year 2026-27 papers (Form No. 130, Form No. 168).
- Revisit your advance tax if you have rent, interest, capital gains or business income. Business owners can see our income tax services page.
Common mistakes
- Quoting old section numbers, such as 194C, in agreements and invoices for payments from 01.04.2026. Use the relevant item of section 393 instead.
- Assuming an old-year notice must be answered under the new Act.
- Believing the new Act raised tax. For individuals, rates and limits were carried over.
FAQs
Do I have to file two returns in 2027? No. In 2027 you file one return, for tax year 2026-27, under the IT Act, 2025 and the new ITR forms.
Is the term “assessment year” gone completely? For years from 01.04.2026, yes. It survives only for older years still handled under the 1961 Act.
Is income up to ₹ 12 lakh still tax-free under the new regime? Yes, for resident individuals. The section 156 rebate of up to ₹ 60,000 covers total income up to ₹ 12,00,000. For salaried persons, that is a salary of ₹ 12,75,000 after the ₹ 75,000 standard deduction.
I chose the old regime last year as a business owner. Must I opt again? No. An option already exercised under the 1961 Act carries over to the new Act.
Where can I read the new Act? The Income Tax Department publishes the full text of the IT Act, 2025, as amended by the Finance Act, 2026, on incometaxindia.gov.in. The link is in the sources below.
For help with your income-tax return or regime choice, you can write to advisory@topgstexperts.com.
Sources
- Objective and scope of the new Act – Income Tax Department e-filing portal
- FAQs on objective and scope of the new Act – e-filing portal
- Income-tax Act, 2025, as amended by the Finance Act, 2026 (full text)
- Press release: Income-tax Act, 2025 comes into force from 01.04.2026
- FAQs on interplay and transition between the 1961 and 2025 Acts
- Section 202 – new tax regime
- Section 156 – rebate for certain individuals
- Section 123 – deduction for life insurance, PF, etc.
- Section 126 – deduction for health insurance premia
- Tax slabs for AY 2026-27 – e-filing portal
This article reflects the law as on 09.11.2026 and is general information, not professional advice. Rates, limits and due dates change; verify them with the official source before acting.