Last reviewed: 5 November 2026
Quick answer: The Income Tax Act, 2025 has been in force since 1 April 2026 and has replaced the Income-tax Act, 1961; it applies from tax year 2026-27 onwards. It restructures and simplifies the law (fewer sections, one unified “tax year” concept) rather than changing tax rates or introducing new taxes. Income up to FY 2025-26 (AY 2026-27) — and the returns, assessments, notices and appeals for those years — continues to be dealt with under the 1961 Act.
Two Income Tax Acts are relevant to filings right now, and it’s easy to mix them up in the middle of a filing season. Here’s the factual position — what each Act is, what actually changes, and what stays the same — for individuals and businesses filing in Vadodara and across India.
Income-tax Act, 1961 vs Income Tax Act, 2025 — the short version
| Income-tax Act, 1961 | Income Tax Act, 2025 | |
|---|---|---|
| In force | 1 April 1962 – 31 March 2026 | From 1 April 2026 |
| Status | Repealed from 1 April 2026; still applies to income up to FY 2025-26 | In force from 1 April 2026 |
| Sections | 700+ (819 including omitted/renumbered provisions, per published trackers) | 536 |
| Chapters | 23 | 23 |
| Schedules | 14 | 16 |
| Time-period concept | “Previous Year” and “Assessment Year” (two linked, offset periods) | Single unified “Tax Year” |
| TDS provisions | Spread across multiple sections (192–206 and others) | Consolidated under one section |
| Common forms | Form 16, Form 26AS, Forms 15G/15H | Renumbered (e.g. Form 16 → Form 130, Form 26AS → Form 168, 15G/15H merged) |
| Tax rates & slabs | Set separately by the annual Finance Act either way — not fixed by either Act itself, and not changed by this transition on its own. | |
What actually changes for you
- If you’re filing a return now, for AY 2026-27 or earlier income: nothing changes — your return is governed by the Income-tax Act, 1961, the same as always.
- If you’re responding to a notice or an ongoing assessment: notices and assessments for years up to AY 2026-27 generally continue under the provisions of the 1961 Act, through the transitional (savings) provisions of the 2025 Act.
- Since 1 April 2026: compliance work — filings, TDS, audits, assessments — has moved to the Income Tax Act, 2025 framework. The underlying computation of income, most deductions, and exemption structures carry over conceptually; what changes is mainly section numbering, defined terms (like “tax year”), and where specific provisions now sit.
- Businesses and NRIs with ongoing cross-border or multi-year matters: transitional provisions govern how matters that straddle the two Acts are treated — this is the area most worth a direct review with us rather than assuming continuity.
- No rate changes from this Act alone: tax slabs, rates, and thresholds are set by the annual Finance Act each year, independent of this restructuring — don’t read a rate change into the 2025 Act itself.
We track this transition as part of the ongoing compliance calendar we run for clients (see how the practice operates) rather than as a one-time notice — the practical detail that matters is usually specific to your filing category, which is worth a direct conversation rather than a general guide.
Questions we’re asked about the transition
Do I need to refile anything because of the new Act?
No. Returns and filings already made under the Income-tax Act, 1961 stand as filed. The 2025 Act applies from 1 April 2026 (tax year 2026-27 onwards); it isn’t retroactive.
Will my tax liability change because of the new Act?
Not on its own. The Income Tax Act, 2025 restructures and simplifies the law rather than changing tax policy — rates and slabs are set separately by each year’s Finance Act, under either law.
Which businesses should review their position after the change on 1 April 2026?
Anyone with matters that span the transition date — ongoing assessments, multi-year contracts, NRI or cross-border positions, or TDS arrangements that reference specific section numbers in internal systems — is worth a direct review, since those are where the renumbering and consolidated provisions have the most practical effect.
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