The New Income-tax Act, 2025: What Changes for You from 1 April 2026
The Income-tax Act, 1961 — amended, patched, and cross-referenced for over six decades — is being replaced. The Income-tax Act, 2025 comes into force from 1 April 2026, and while it doesn’t introduce any new tax, it does change the structure, forms, and some terminology taxpayers have used for years. Here’s a plain-language walkthrough of what actually changes and what stays the same.
Why a new Act at all?
The 1961 Act had accumulated so many amendments, provisos, and explanations over the decades that it became difficult even for professionals to navigate. The 2025 Act consolidates and simplifies the language without altering the underlying tax policy — it is a rewrite for clarity, not a new tax regime.
The biggest conceptual change: “Tax Year” replaces “Previous Year” and “Assessment Year”
For decades, Indian taxpayers have worked with two overlapping concepts: the Previous Year (the year income is earned) and the Assessment Year (the year it is assessed and taxed). The 2025 Act scraps this dual system in favour of a single, simpler concept: the Tax Year.
This applies from FY 2026-27 onwards. Income earned during FY 2025-26 will still be governed by the old Act and assessed as AY 2026-27 under the familiar system. Income earned from 1 April 2026 onwards falls under the new Act and is assessed as Tax Year 2026-27 onwards. In other words, this July’s ITR filing (for FY 2025-26 income) still follows the old rules — the new Tax Year concept kicks in for income earned after 1 April 2026.
Forms are being consolidated
Two changes worth knowing about if you deal with tax audits or TDS declarations:
- Audit reports: The three separate audit forms — Form 3CA, Form 3CB, and Form 3CD — are merged into a single unified Form 26 under the new Act, removing the need to juggle multiple formats for the same audit engagement.
- Nil-TDS declarations: Form 15G and Form 15H, long used by individuals to declare that their income doesn’t attract TDS, are merged into a single new Form 121. For a Tax Year beginning on or after 1 April 2026, a recipient can furnish this declaration under Section 393(6) of the new Act. It’s filed in the same place — the e-filing portal, under ‘Income Tax Forms’ — but as a single, standardised form.
What does NOT change
It’s worth being clear about what the new Act leaves untouched, since a lot of anxiety around “a whole new tax law” is misplaced:
- No new taxes are being introduced — this is a restructuring of the existing law, not a fresh levy.
- Your PAN, TAN, faceless assessment, and faceless appellate framework all continue as before.
- Past assessments and pending proceedings under the 1961 Act remain valid. If your AY 2023-24 assessment was completed under the old Act, it stays valid after the new Act takes effect — the repeal doesn’t disturb anything relating to years before 1 April 2026.
What this means for your July 2026 filing
If you’re filing your ITR for FY 2025-26 this July, you’re still filing under the Income-tax Act, 1961 framework, using AY 2026-27 forms. The new Act, the Tax Year concept, and the new forms (26, 121, and others) apply going forward — to income earned and compliance due from 1 April 2026 onwards, including advance tax for Tax Year 2026-27.
This overlap period — old Act compliance for FY 2025-26 income happening alongside the new Act’s April 2026 start — is exactly where mistakes creep in. Knowing which form and which year’s rules apply to which filing is the first thing to get right.
Our recommendation
Don’t wait until next year’s filing season to get familiar with the new structure. If you run a business that undergoes tax audit, start planning for the Form 26 transition now, and if you rely on Form 15G/15H declarations for vendors or investments, get comfortable with Form 121 ahead of the 1 April 2026 changeover.
If you’d like help mapping out how the transition to the Income-tax Act, 2025 affects your specific filings, reach out to our team — we’re tracking every notification as it comes out.