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

Updated 2026-08-02 · By KyaTax · 7 min read

The Income-tax Act, 2025 has been enacted to replace the six-decade-old Income-tax Act, 1961, with effect from 1 April 2026 — applicable from financial year 2026-27 onwards. It is described by the government as a modernisation and simplification exercise rather than a change in tax rates.

What changed

A shorter, restructured law: the number of sections has been reduced from 819 (across 23 chapters) to 536, with simpler language and consolidated provisions.
The "Tax Year" concept: the old "Previous Year" and "Assessment Year" terminology is replaced by a single Tax Year. Income earned in FY 2026-27 is simply "Tax Year 2026-27".
Streamlined compliance: return timelines and TDS/TCS provisions have been reorganised for easier reading and reference.

What stayed the same

Income tax slabs and rates are unchanged — both the new and old regimes continue, with the new regime remaining the default.
The basic exemption under the new regime remains ₹4 lakh; income up to ₹12 lakh remains effectively tax-free through the Section 87A rebate (₹12.75 lakh for salaried, after the ₹75,000 standard deduction).

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

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

Rules change often and how they apply depends on your exact numbers and facts. Don't guess on the new Income-tax Act 2025 — get a qualified professional to review your case.

💬 Talk to a KyaTax expert →

Frequently asked questions

Does the Income-tax Act 2025 increase my tax?

The reform did not change slab rates — both regimes continue with the same rates. Your actual liability depends on your income and regime choice; confirm with a professional for your case.

When does the new Act take effect?

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

Do I need to do anything differently?

For most individuals, filing continues as before with new terminology. Businesses should review references to old section numbers. Speak to an expert if your filings cite specific sections.