Income-tax Act 2025: What Changed From 1 September 2026

The Income-tax Act, 1961 was repealed on 1 April 2026 and replaced by the Income-tax Act, 2025. The new Act has 536 sections against 819 in the old one, and it introduces no new tax. What changes for you is the language: new section numbers, new form numbers and a single “tax year” in place of the previous year and assessment year.

Key facts

Why the 1961 Act was replaced

The 1961 Act had been amended nearly 65 times, with more than 4,000 amendments, according to a PIB explainer. Long provisos and scattered provisions made it hard to read without expert help.

The Income-tax Bill, 2025 was referred to a Select Committee of Parliament. The government then withdrew it and brought in the Income-Tax (No. 2) Bill, 2025, which took in most of the committee’s suggestions. Parliament passed it on 12 August 2025, and the President gave assent on 21 August 2025. The Income-tax Rules, 2026 were notified on 20 March 2026, and the Act came into force on 1 April 2026.

PIB describes the reform as a rewrite “without altering the underlying tax policy”. The drafting principles it lists include no major policy changes and no change in tax rates.

Size of the new Act and Rules

The department’s FAQ gives the numbers: 536 sections and 16 schedules, down from 819 sections and 14 schedules. It says complexity fell because:

• provisos and explanations were folded into the main text;
• tables and formulas replaced long narrative clauses;
• obsolete provisions were removed;
• cross-references were made more direct.

The Rules shrank from 511 rules with 399 forms to 333 rules with 190 forms.

What stays the same for individuals

Slab rates are still set each year by the Finance Act. Our income tax slabs page has the current rates, and the old vs new regime comparison shows which one suits you.

What changes in terms and structure

Tax year replaces previous year and assessment year

A tax year is the 12-month financial year starting 1 April. Income earned in FY 2026-27 is “tax year 2026-27”. It is still assessed after the year ends, as before. The term “assessment year” is no longer used in the new Act.

Section numbers moved

The first four rows come from the Income Tax Department and PIB. The 80C, 80D and 87A rows come from ClearTax’s mapping; check the department’s section-mapping tool on incometaxindia.gov.in before quoting a section in a reply to a notice.

Form numbers changed

The e-Filing portal’s form mapping guide shows Forms 15G and 15H becoming Form 121. It also maps quarterly TDS return Form 24Q to Form 138 and Form 26Q to Form 140. Form 16, the salary TDS certificate, becomes Form 130, according to TaxGuru. See our Form 16 and Form 26AS guide for what the certificate should show.

Other changes

TDS rules are now grouped under one section, Section 393. The definition of virtual digital assets is broader and covers assets held in digital form on cryptographic ledgers, according to PIB. The three presumptive taxation schemes now sit together in one table in Section 58.

Which returns still follow the 1961 Act

Anything relating to a year that began before 1 April 2026 stays under the old law. Section 536 of the 2025 Act handles the handover:

Your first return under the 2025 Act will be for tax year 2026-27, filed in 2027. Under the new Act, a belated return can be filed within 9 months of the end of the tax year. A revised return can be filed within 12 months of the end of the tax year.

If you have pending proceedings that span both Acts, a chartered accountant can confirm which provisions apply to each year.

Where to read the official text

• The Act as published in the Gazette of India, on egazette.gov.in.
• The Act as amended by the Finance Act, 2026, on incometaxindia.gov.in.
• The notified Income-tax Rules, 2026, on incometaxindia.gov.in.
• The department’s FAQ on the new Act, on the e-Filing portal.

Links to each are in the Sources list below.

Frequently asked questions

Is the Income-tax Act, 1961 still in force?

No. It was repealed on 1 April 2026. It still governs returns, assessments and appeals for years that began before that date.

Did tax rates change under the Income-tax Act, 2025?

The Act introduced no new tax, and PIB says tax rates were not modified as part of the rewrite. Rates for each year are still set by the annual Finance Act.

Which Act applies to my ITR for FY 2025-26?

The Income-tax Act, 1961. Returns for AY 2026-27 use the forms prescribed under the old Act.

Do I need to choose the new tax regime again?

No. An option exercised under the old Act is treated as made under the equivalent provision of the new Act.

What is a tax year?

The 12-month financial year starting 1 April. It replaces both “previous year” and “assessment year” from tax year 2026-27.

How many sections does the Income-tax Act, 2025 have?

536 sections and 16 schedules, compared with 819 sections and 14 schedules in the 1961 Act.

Sources

• Objective and scope of the New Act FAQ — Income Tax Department e-Filing portal (checked 16 Sep 2026)
• Income Tax Returns under the new Act — Income Tax Department e-Filing portal (checked 16 Sep 2026)
• Form Mapping Guide, Income-tax Act 1961 to 2025 — Income Tax Department e-Filing portal (checked 16 Sep 2026)
• Income-tax Act, 2025 comes into force from 1 April 2026 — Press Information Bureau (checked 16 Sep 2026)
• The Income Tax Act, 2025: Reshaping Tax Framework — Press Information Bureau (checked 16 Sep 2026)
• Income-tax Act, 2025 — Gazette of India (checked 16 Sep 2026)
• Income-tax Act, 2025 as amended by Finance Act, 2026 — Income Tax Department (checked 16 Sep 2026)
• Income-tax Rules, 2026 (notified 20 March 2026) — Income Tax Department (checked 16 Sep 2026)
• Income Tax Act 2025 section mapping — ClearTax (checked 16 Sep 2026)
• Form 130 replacing Form 16 — TaxGuru (checked 16 Sep 2026)