India has been taxing income under the same statute since 1961. On 1 April 2026 that ended. The replacement is shorter, renumbered and reorganised, and the most common question about it has an unsatisfying answer: for most taxpayers, the amount owed is much the same.
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 with effect from 1 April 2026. Its headline change is drafting, not rates: a single "tax year" now replaces both "previous year" and "assessment year".
The 1961 Act had grown to more than 800 sections after six decades of amendment, layered with provisos, explanations and clauses that referred to other clauses. The 2025 Act reorganises the same subject matter into 536 sections across 23 chapters, with the word count cut by roughly half. Tables and formulas replace long descriptive passages in many places.
This is a rewrite of how the law is expressed. It is worth being clear about that up front, because a lot of coverage has implied a change in what you pay.
The bottom line
Changed: terminology, section numbers, chapter structure, and how TDS provisions are organised.
Unchanged: the 1 April to 31 March cycle, and the substantive basis on which most income is taxed.
Still governed by the old Act: anything relating to AY 2024-25 and earlier, including pending litigation.
The tax year, and why the change is smaller than it sounds
Under the old law you dealt with two years at once. Income earned in the previous year 2024-25 was taxed in the assessment year 2025-26. Getting the two the wrong way round on a form was one of the most common filing errors in the country.
Section 3 of the 2025 Act collapses them. There is now one tax year, running 1 April to 31 March, covering both the earning and the assessment of that income.
What has not moved is the calendar itself. The year still starts on 1 April and ends on 31 March, and the term "financial year" survives elsewhere in the legislation. So the change is that you stop translating between two labels, not that any date shifts.
The mapping is worth keeping somewhere you can find it. Tax year 2024-25 under the new Act corresponds to previous year 2024-25 under the old Act, which corresponds to assessment year 2025-26. The new terminology applies from tax year 2026-27 onward and does not reach back to income earned before 1 April 2026.
What happened to the section numbers you know
Every section number you have memorised has moved. Section 80C, Section 143(1), Section 194 — the concepts survive, the numbers do not.
The chapter structure gives a rough map of where things went:
| Subject | 1961 Act | 2025 Act |
|---|---|---|
| Charging provisions | Chapters I-II | Chapters I-II |
| Heads of income | Chapter IV, scattered | Chapter III, consolidated |
| Deductions | Chapters VI, VI-A | Chapters IV-V |
| TDS and TCS | Chapter XVII | Chapter VII |
| Assessment | Chapter XIV | Chapter VIII |
| Appeals | Chapter XX | Chapter XI |
| Penalties | Chapter XXI | Chapter XII |
The TDS move is the one that changes daily work. Under the old Act the deduction provisions were spread across a long run of sections in the 190s and beyond, each with its own threshold and rate, and finding the right one meant knowing where to look. The 2025 Act pulls them into a single structured chapter with the rates and thresholds tabulated.
Does sixty years of case law still apply?
Largely, yes, and this is the question professionals asked first.
Where a substantive provision has been carried into the new Act without a change in meaning, judicial precedent decided under the old provision continues to apply. A rewrite that renumbers a section without altering what it does should not disturb the interpretation courts have already settled.
The caution is that "without a change in meaning" does the heavy lifting in that sentence. Where the 2025 Act has compressed several provisos into a table or restated a passage in different words, whether the meaning survived intact is a question that will take some years and some litigation to answer. Anyone relying on a fine point of an old judgment should check the new wording rather than assume.
The transition, in practical terms
Two statutes are running side by side for a while, and which one applies depends on the year the income belongs to.
- AY 2024-25 and earlier: the 1961 Act governs, including any assessment, appeal or litigation still pending.
- From 1 April 2026: the 2025 Act governs.
- The Income-tax Rules, 2026 replace the 1962 Rules from the same date, with the old Rules continuing to apply to the earlier years.
So a notice you receive in 2026 about AY 2023-24 is a 1961 Act notice, and answering it means working with the old section numbers.
What this does not change
Slab rates and the choice between tax regimes are set by the annual Finance Act, not by this restructuring. The 2025 Act is the machinery; the rates are decided each year as before. If your tax bill moved this year, look to the Finance Act and to the new Rules rather than to the new statute.
The compliance calendar is also broadly intact. Advance tax instalments, TDS deposit dates and the general shape of the filing year continue as they were.
Worked example
A salaried taxpayer filing in 2026 for income earned between April 2025 and March 2026 is dealing with the old regime: previous year 2025-26, assessment year 2026-27, under the 1961 Act.
Income earned from 1 April 2026 onward falls into tax year 2026-27 under the new Act, with no separate assessment year to name.
For a year or so the two vocabularies overlap, which is exactly the period in which people file under the wrong label. The safest habit is to state the actual dates — "income earned in the year ending 31 March 2027" — rather than the shorthand.
Common mistakes
- Expecting a lower tax bill. The Act restructures the law; the Finance Act sets the rates.
- Assuming old section numbers still work. They do not, and quoting Section 80C in a 2026-27 filing context will not match the statute.
- Treating old case law as void. Precedent survives where the substantive provision was carried over unchanged.
- Applying the new Act to an old year. Anything from AY 2024-25 or earlier stays under the 1961 Act.
- Assuming the year dates moved. The tax year still runs 1 April to 31 March.
- Forgetting the Rules changed too. The Income-tax Rules, 2026 replaced the 1962 Rules on the same date and carry real changes of their own.
Frequently asked questions
When did the Income-tax Act, 2025 come into force? 1 April 2026, replacing the Income-tax Act, 1961.
What is a tax year? The twelve months from 1 April to 31 March, defined in Section 3. It replaces both "previous year" and "assessment year".
Did tax rates change? Not through this Act. Rates come from the annual Finance Act, as they always have.
How many sections does the new Act have? 536, across 23 chapters, against more than 800 in the 1961 Act.
Is old case law still valid? Where the provision was carried over without a change in meaning, yes. Where the drafting changed materially, expect argument.
Which Act applies to my pending appeal for AY 2022-23? The 1961 Act. The old law continues to govern earlier years.
Do I file my return differently? The filing mechanics are broadly familiar. The terminology on the forms is what changed, along with the Rules sitting underneath them.