The Income-tax Act 2025: What Changes, What Doesn't, and Why This Year's Filing Is Still Under the Old Law

For the first time in over six decades, India is replacing its income-tax law. The Income-tax Act, 2025 comes into force on 1 April 2026, retiring the Income-tax Act, 1961. It's a genuinely historic change — but it's also widely misunderstood, and the most important thing to know is what it does not change for the return you're filing this season.

The single most important point: this year is still the old Act

Your return for AY 2026-27 (Financial Year 2025-26) is filed under the Income-tax Act, 1961. The new Act applies from 1 April 2026 onwards — that is, for income earned in FY 2026-27 (which the new law calls "Tax Year 2026-27"). So nothing about how you file this July changes because of the 2025 Act. Plan for it; don't file under it yet.

What actually changes

The 2025 Act is largely a consolidation and re-codification — a cleaner, simpler version of the same tax system, not a wholesale rewrite of what's taxable. The headline changes:

• A single "Tax Year". The Act removes the long-confusing distinction between "previous year" (when you earn) and "assessment year" (when you're assessed). From the new Act, there's just one Tax Year — a welcome simplification.
• Reorganised into 23 chapters with far cleaner language, plain tables, and virtually every section renumbered. Provisions you know by heart will sit at new section numbers (for example, the presumptive provisions of the old 44AD/44ADA are consolidated under the new structure).
• Some substantive tweaks in specific areas, even though the core framework is retained.

What stays the same

This is the reassuring part. Tax slabs, the old and new regimes, and core tax principles remain largely unchanged. Capital-gains treatment, deductions, the rebate structure — the substance carries over. You are not facing a new set of rates or a new way of computing income; you're facing the same system in a tidier book.

What it means for you, practically

• This filing season (AY 2026-27): business as usual under the 1961 Act. Everything in our other ITR guides applies.
• From FY 2026-27: start referring to provisions by their new section numbers, and get comfortable with the single "Tax Year" language. Advisers and software will map old sections to new ones during the transition.
• Planning: because the substance is largely stable, your tax-planning decisions (regime choice, capital-gains timing, deductions) carry forward — the labels change more than the logic.

Common misunderstandings

• "The new Act changes my tax this July." It doesn't — AY 2026-27 is under the 1961 Act.
• "Slabs and regimes are being scrapped." No — they largely continue.
• "All my old knowledge is obsolete." The section numbers change, the substance mostly doesn't.
• "I need to do something now." For this return, no. For FY 2026-27 onwards, just adopt the new references.

Frequently asked questions

When does the Income-tax Act 2025 take effect? From 1 April 2026, applying to Tax Year 2026-27 (FY 2026-27) and onwards. It replaces the Income-tax Act, 1961.

Which law applies to my AY 2026-27 return? The Income-tax Act, 1961. The 2025 Act does not apply to income earned in FY 2025-26.

Are tax slabs or regimes changing under the new Act? Largely no — slabs, the old/new regimes and core principles are retained. The Act mainly simplifies language and renumbers sections.

What is the "Tax Year"? The new Act replaces the "previous year / assessment year" pair with a single "Tax Year," reducing a long-standing source of confusion.

A new book, the same fundamentals

The Income-tax Act 2025 is a clean-up, not an upheaval — and crucially, it doesn't touch the return you're filing this season. File AY 2026-27 under the existing law with confidence, and treat the new Act as next year's vocabulary, not this year's worry.

Plan your transition with RDA — we'll file this year under the current law and keep you ahead of the new Act's changes for the year that follows.

Written by CA Rahul Dang, Founder & Practice Lead, RDA Tax Advisory Services Pvt Ltd, Baner, Pune.