The Income-tax Act, 2025 replaces the Income-tax Act, 1961. The 1961 Act stands repealed with effect from 1 April 2026, and the new Act applies to income earned from the financial year 2026-27 onwards.
A simplified structure
The new Act is primarily aimed at simplifying and modernising the language and structure of the income-tax law, rather than overhauling tax policy. Broadly:
- It is organised into a smaller number of sections and chapters than the 1961 Act, with provisions reorganised for easier navigation.
- Explanations and provisos have largely been brought into the main text of the sections.
- Tables and formulas replace some lengthy narrative provisions.
- Redundant and obsolete provisions have been removed, and cross-references made clearer.
The ‘tax year’ concept
One of the most visible changes is terminology:
- The term “tax year” replaces “previous year.”
- The term “assessment year” has been discontinued.
- A tax year is a period of twelve months within a financial year — so income of FY 2026-27 is referred to as Tax Year 2026-27.
Transition from the 1961 Act
The Act contains transitional provisions so that pending proceedings and matters under the 1961 Act continue smoothly and are not disrupted by the change. Section references and procedures are being renumbered under the new Act, so documents and compliance from FY 2026-27 will refer to the 2025 Act.
What this means in practice
For most taxpayers, the change is largely structural — the Act is intended to be easier to read and navigate. However, section numbers, forms, and procedural references are changing, so it is important to refer to the correct provisions of the 2025 Act for the current year and to seek advice where a specific position is involved.
This note is for general information only and does not constitute professional advice. The Income-tax Act, 2025 and the related rules, forms, and notifications should be referred to for the authoritative position, and professional advice should be sought for specific circumstances.