Income-tax Act, 2025: which law governs your year
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 with effect from 1 April 2026. It is a rewrite in simpler language, with about 536 sections and 16 schedules, rather than a change in tax policy. Most rates, thresholds and concepts carry over, but the section numbers, the forms and some terms are new.
"Tax year" replaces "previous year" and "assessment year"
Under the 1961 Act, income of the previous year (for example, FY 2025-26) was assessed in the following assessment year (AY 2026-27). The 2025 Act uses a single tax year, which is the financial year in which the income is earned. The first tax year under the new Act is tax year 2026-27 (1 April 2026 to 31 March 2027).
Which Act applies to what
| Matter | Governing Act |
|---|---|
| Income of FY 2025-26 and earlier (AY 2026-27 and earlier), including returns being filed now | 1961 Act |
| Assessments, reassessments, penalties and appeals for those years, including those started after 1 April 2026 | 1961 Act, through the repeal and savings provisions in section 536 of the 2025 Act |
| Income of tax year 2026-27 onwards | 2025 Act |
| TDS and TCS on payments made from 1 April 2026 | 2025 Act (sections 392 to 394) |
| Advance tax for tax year 2026-27 | 2025 Act |
What this means for you
- Read every notice against the right Act. A notice for AY 2023-24 will quote 1961 Act sections; a notice about TDS for this year will quote 2025 Act sections.
- Update your systems. Accounting and payroll software, TDS returns and challans now use the new section references and payment codes. Our TDS and TCS table shows the old and new references side by side.
- Keep both sets of references in your working papers for a few years, because the two Acts will run in parallel for pending matters.
- Check the transition rules for carried-forward losses, depreciation and unabsorbed amounts. In general they continue, but the conditions are now in the new sections.
- Learn the new numbers alongside the old. On this website we cite both, for example "section 54 of the Income-tax Act, 1961 (now section 82 of the Income-tax Act, 2025)".
Common old and new numbers
| What | 1961 Act | 2025 Act |
|---|---|---|
| New tax regime | Section 115BAC | Section 202 |
| Deduction for investments | Section 80C | Section 123 |
| Exemption on reinvestment in a house | Section 54 | Section 82 |
| Tax audit | Section 44AB | Section 63 |
| Return of income | Section 139 | Section 263 |
| Processing of return | Section 143(1) | Section 270(1) |
| Reassessment notice | Section 148 | Section 280 |
| Appeal to Commissioner (Appeals) | Section 246A | Section 357 |
| Salary TDS certificate | Form 16 | Form 130 |
| Tax audit report | Forms 3CA, 3CB, 3CD | Form 26 |
| Annual tax statement | Form 26AS and AIS | Form 168 |
| Updated return | ITR-U | ITR-UN |
The full list is in our old and new section finder.