Income-Tax Act, 2025: What Actually Changes from 1 April 2026

Blog › Income Tax

The Income-tax Act, 2025 replaces the six-decade-old Income-tax Act, 1961, with effect from 1 April 2026 — applicable from financial year 2026-27. The government describes it as modernisation and simplification, not a change in tax rates.

sections (was 819)

income still tax-free (new regime)

FY26-27

first "Tax Year"

What changed

Shorter law: 819 → 536 sections, simpler language.
The "Tax Year": the old "Previous Year" and "Assessment Year" merge into one Tax Year. Income of FY 2026-27 = "Tax Year 2026-27".
Cleaner compliance: return timelines and TDS/TCS provisions reorganised for readability.

What stayed the same

Slabs and rates are unchanged — both new and old regimes continue (new is default).
Income up to ₹12 lakh remains effectively tax-free under the new regime via the Section 87A rebate.

In short: the structure of the law changed, not the amount of tax most people pay. The biggest practical shift is vocabulary — get used to "Tax Year 2026-27".

🧮 Worked example

Riya, a salaried employee, has ₹11.5 lakh taxable income in FY 2026-27.

Under the 1961 Act (FY 2025-26 wording)	Under the 2025 Act (FY 2026-27)
"Previous Year" 2026-27, "Assessment Year" 2027-28	Simply "Tax Year 2026-27"
Tax ≈ ₹0 (87A rebate, new regime)	Tax ≈ ₹0 (same rebate, same rate)

Her tax bill doesn't change — only how the year is named on her return.

👩‍💼 Expert view

The reform is mostly cosmetic for individuals, but businesses that quote section numbers in agreements, TDS workings or notice replies should map old sections to the new ones this year — an out-of-date section reference can cause avoidable queries.

⚠️ Please read: This article is general information based on laws and notifications current as of August 2026. It is not legal, tax, accounting or professional advice or opinion and must not be relied upon for any decision. Rules change frequently and their application depends on your specific facts. Verify the latest position and connect with a KyaTax expert or your advisor before acting.

💬

Not sure how this applies to you?

Rules change and the answer depends on your exact numbers. Get a qualified professional to review the new Income-tax Act 2025 for your case — before you act.

Talk to a KyaTax expert →

Frequently asked questions

Does the Income-tax Act 2025 increase my tax?

No rate change — both regimes continue at the same rates. Your actual liability depends on income and regime; confirm for your case.

When does it take effect?

From 1 April 2026, for income of FY 2026-27 (Tax Year 2026-27) onwards.

Do I need to do anything differently?

Most individuals file as before with new terminology. Businesses should refresh old section references. Ask an expert if your filings cite specific sections.