Income Tax Act 2025: What Actually Changes for You From April 2026

After sixty-four years, the Income-tax Act, 1961 is being retired. Its replacement, the Income-tax Act, 2025, was passed by Parliament in 2025 and comes into force on 1 April 2026. If you have seen headlines calling it "the biggest tax reform in decades" and quietly panicked about your salary, here is the reassuring part: your tax bill does not change because of this law. What changes is the vocabulary, the section numbers, the forms and the shape of the statute. The arithmetic stays put.

That said, "only the wrapper changed" is too dismissive. If you have ever emailed your employer about "80C proof" or told your accountant to check "section 87A", those phrases are about to be wrong. Anyone who deals with tax documents more than once a year will spend a while relearning labels. This guide covers what genuinely changes, what does not, and what you should do about it.

1. When the new Act takes effect

The new Act applies from 1 April 2026, which is the start of tax year 2026-27. That timing matters more than it sounds, because it splits your near-term tax life in two:

• FY 2025-26 (AY 2026-27) — the year whose return most people are filing right now — is still governed entirely by the 1961 Act. Same sections, same forms, same language. Nothing in the new law touches it.
• Income earned from 1 April 2026 onwards falls under the 2025 Act. That is the year currently in progress, and it is the return you will file in mid-2027.

So there is a transitional period in which both statutes are live: one for the return you are filing and one for the salary you are earning. Expect a stretch where some documents, portals and helpdesks still speak the old language while others have switched. The Income Tax Department portal and PIB releases are the places to check when the two disagree.

2. The biggest visible change: "tax year"

The single change ordinary taxpayers will notice most is the death of a confusing pair of terms. Under the 1961 Act you earned income in a previous year and were assessed on it in the following assessment year. That is why the salary you earned between April 2025 and March 2026 belongs to "FY 2025-26" but the return is labelled "AY 2026-27" — a mismatch that has caused people to file for the wrong year for as long as e-filing has existed.

The 2025 Act collapses both into a single concept: the tax year. It runs 1 April to 31 March, and the income earned in it is assessed under the same label. Income earned from April 2026 to March 2027 is simply "tax year 2026-27". There is no second number to keep straight.

3. Every section number moves

Because the statute was rewritten from scratch rather than amended, the section numbering is entirely new. The provisions survive; their addresses do not. A few that ordinary taxpayers actually use:

Note one thing carefully, because it is widely misreported: the rebate lands at section 156, not 157. Section 157 in the new Act deals with relief where salary is received in arrears or in advance — a different provision entirely. If you see "87A is now 157" anywhere, it is wrong.

Section 156 is also tidier than its predecessor. It gathers both rebates into one place: sub-section (1) covers the old-regime rebate for taxable income up to ₹5,00,000, and sub-section (2) covers the new-regime rebate for taxable income up to ₹12,00,000 along with the marginal relief that applies just above that line. Under the 1961 Act you had to read 87A alongside a proviso in 115BAC to piece the same picture together.

4. Shorter law, more tables

The rewrite was explicitly a simplification exercise. The 1961 Act had grown to roughly 819 sections across 14 schedules; the 2025 Act has 536 sections and 16 schedules, and runs to about 622 pages against 823. The subordinate rules were pruned too, from around 511 rules and 399 forms down to roughly 333 rules and 190 forms, according to published summaries of the Act.

The style changed as much as the length. Provisos and explanations — the "provided that… provided further that…" chains that made the old Act unreadable — have largely been replaced by numbered sub-sections and tables. Rates, thresholds and timelines that used to be buried in prose now appear in grids you can scan. Cross-references were cut back, so a single provision is more likely to be comprehensible without opening four other sections.

For a salaried taxpayer this is mostly invisible. For anyone who has ever tried to read the actual law behind a deduction, it is a genuine improvement.

5. TDS and TCS pulled into two sections

The most striking piece of consolidation is in tax deducted at source. Under the old Act, TDS lived across more than sixty sections from 192 through 194T, each with its own threshold, rate and drafting quirks. The new Act keeps section 392 for salary TDS and folds essentially everything else into section 393, presented as a table of payment types, rates and thresholds. Tax collected at source is similarly consolidated.

The important detail: the rates and thresholds themselves are largely unchanged. A tenant deducting TDS on rent, or a company deducting on professional fees, applies the same percentage to the same threshold as before — it is simply found in a different place, laid out as a row in a table rather than as a separate section. Detailed breakdowns of section 393 are already circulating for deductors who need the mapping.

If you deduct TDS in any capacity — as an employer, a landlord's tenant paying above the threshold, or a business paying contractors — this is the one part of the new Act worth reading properly rather than skimming.

6. What does not change: the rates

This deserves its own heading because it is the question everybody asks. The Income Tax Act 2025 does not change any tax rate, slab, rebate amount or deduction limit. Slabs continue to be set each year by the Finance Act, exactly as before. The new-regime slabs for tax year 2026-27 are the same ones that applied in FY 2025-26:

The ₹75,000 standard deduction for salary and pension survives. So does the rebate that takes tax to nil at ₹12,00,000 of taxable income, and the ₹12,75,000 zero-tax ceiling for a salaried person once the standard deduction is added. The new regime remains the default; the old regime remains available if you opt for it. The 4% Health and Education cess is unchanged. You can check any of this against your own numbers with our income tax calculator.

7. What you must do differently when filing

For most salaried taxpayers the honest answer is: very little. But there are five practical adjustments.

1. Use one year label. From tax year 2026-27, stop translating between financial year and assessment year. There is one number.
2. Learn the new form names. Reporting has been renumbered along with the sections — the salary certificate that was Form 16 becomes Form 130, and the annual tax statement that was Form 26AS becomes Form 168. Your employer and the portal will issue the new ones; the content is the same document doing the same job.
3. Update the sections you quote. When you submit investment proofs to your employer or instruct an accountant, "80C" becomes section 123 and "80D" becomes section 126. Many employers will accept the old shorthand for a year or two, but forms and portals will use the new numbers.
4. Re-check any template or spreadsheet you maintain. Rent receipts, TDS working sheets, declaration formats and salary structures that cite section numbers all need updating. This is where small businesses will lose the most time.
5. Do not apply the new Act to an old return. A belated or revised return for FY 2025-26, filed during 2026, is still an old-Act return. Filing it with new-Act section references will only confuse matters. Our ITR filing checklist for FY 2025-26 covers that year on its own terms.

8. A short checklist

The wider commentary in outlets such as The Economic Times has settled on roughly this conclusion: the 2025 Act is a large administrative reform and a small taxpayer-facing one. The people who genuinely have to relearn their trade are tax professionals, payroll teams and software vendors. For a salaried individual, it is a vocabulary update with a slightly friendlier statute behind it.