# Income-tax Act, 2025: what changes from 1 April 2026

**TL;DR:** The Income-tax Act, 2025 (Act No. 30 of 2025) replaces the Income-tax Act, 1961 from 1 April 2026. It is a structural rewrite, not a tax-rate change. The new Act runs to 536 sections across 23 chapters and 16 schedules, folds the old "assessment year" and "previous year" into a single **Tax Year**, and writes faceless assessment into the statute itself. Your slabs, deductions, and refund mechanics still flow from the annual Finance Act, so nothing about how much tax you owe changes on day one.

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## On this page

- [What the Income-tax Act, 2025 actually is](#what-the-income-tax-act-2025-actually-is)
- [The timeline from 1961 to 2026](#the-timeline-from-1961-to-2026)
- [Tax Year: the single biggest conceptual change](#tax-year-the-single-biggest-conceptual-change)
- [Old Act vs new Act at a glance](#old-act-vs-new-act-at-a-glance)
- [What does not change](#what-does-not-change)
- [Faceless assessment, now in the statute](#faceless-assessment-now-in-the-statute)
- [Virtual digital assets and undisclosed income](#virtual-digital-assets-and-undisclosed-income)
- [How renumbering affects your documents and citations](#how-renumbering-affects-your-documents-and-citations)
- [Which Act governs which year](#which-act-governs-which-year)
- [A pre-April 2026 checklist](#a-pre-april-2026-checklist)
- [How Niyam helps you track the transition](#how-niyam-helps-you-track-the-transition)
- [Frequently asked questions](#frequently-asked-questions)
- [Key takeaways](#key-takeaways)

## What the Income-tax Act, 2025 actually is

The Income-tax Act, 2025 is the new statute that governs direct tax in India. Parliament passed it in August 2025, the President gave assent on 21 August 2025, and it carries the official label **Act No. 30 of 2025**. It comes into force on 1 April 2026, and on that date it replaces the Income-tax Act, 1961, the law that had governed Indian income tax for more than six decades.

Read that first paragraph again, because the word that matters most is "replaces," not "amends." This is not another Finance Act tweaking a rate here and a threshold there. It is a full rewrite of the principal direct-tax law. The Income-tax Act, 1961 came into force on 1 April 1962. Over the years that followed, it absorbed hundreds of amendments, provisos, explanations, and inserted sections with letters trailing the numbers. The result was a statute that even tax professionals found hard to read in a single pass. The 2025 Act is the government's answer to that sprawl.

Here is the part that trips people up. A rewrite of this size sounds like it should change your tax bill. It does not, at least not by itself. The 2025 Act reorganises the law. It renumbers, reorders, and simplifies the language. The actual rates of tax, the slabs, the standard deduction, and the year-by-year policy choices still arrive through the annual Finance Act, exactly as they did under the 1961 regime. So when 1 April 2026 arrives, the architecture of the law changes while the price you pay does not move because of the new Act.

If you want the primary text, the consolidated Act sits on the income-tax department portal at [incometax.gov.in](https://www.incometax.gov.in/) and in the official statute database at [India Code](https://www.indiacode.nic.in/). Independent clause-by-clause analysis is published by [PRS Legislative Research](https://prsindia.org/). Those three sources are where you verify anything you read about the Act, including this article.

## The timeline from 1961 to 2026

It helps to see how the new Act arrived, because the path was not a straight line.

The Finance Minister first signalled a comprehensive review of the 1961 Act in the 2024 budget speech. A draft Income-tax Bill came before the Lok Sabha in February 2025. That version was then referred to a Select Committee of the Lok Sabha, chaired by the Member of Parliament Baijayant Panda, which examined the text and returned a detailed report with recommendations in mid-2025. The government withdrew the February draft and brought a revised Bill that folded in the committee's suggestions.

The revised Bill cleared the Lok Sabha on 11 August 2025 and the Rajya Sabha on 12 August 2025. Presidential assent followed on 21 August 2025. The Act fixes its own commencement date at 1 April 2026, which gives taxpayers, software vendors, and the department a clear runway to prepare. That gap between assent and commencement is deliberate. It lets the Central Board of Direct Taxes notify rules, update return forms, and rebuild the filing portal against the new section numbers before anyone has to file under them.

So the chronology, in plain order, is this. Review announced in 2024. Draft Bill in February 2025. Select Committee review. Revised Bill passed in August 2025. Assent on 21 August 2025. Force from 1 April 2026. By the time you read this in 2026, the Act is law but the 1961 Act still governs the income you earned in the financial year that ended on 31 March 2026.

## Tax Year: the single biggest conceptual change

If you remember one substantive idea from the 2025 Act, make it this one. The Act introduces a single concept called the **Tax Year** and uses it to replace two terms that confused taxpayers for sixty years: the "previous year" and the "assessment year."

Under the 1961 Act, you earned income in the "previous year," and that income was taxed in the following "assessment year." So income earned in the financial year 2024-25 was assessed in assessment year 2025-26. Two labels for what was, to most people, one stretch of time. The mismatch generated a steady stream of errors on returns, in challans, and in correspondence, because people routinely entered the wrong year in the wrong box.

The 2025 Act collapses that into the Tax Year, which is the financial year running from 1 April to 31 March. You earn income in a Tax Year and you are taxed for that same Tax Year. For a business or profession that is newly set up, the first Tax Year begins on the date the business is set up or the source of income first comes into existence, and runs to the end of that financial year. One label, one period, far less room to mix things up.

This is a genuine simplification, and it is the change most likely to show up in everyday practice. Return forms, tax software, and your own working papers all have to switch vocabulary. The amount of tax does not change because of it. The way you describe the period changes.

## Old Act vs new Act at a glance

The table below sets the structural differences side by side. Treat the rate and policy rows carefully, because the point of those rows is that they do not move with the new Act.

| Feature | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Status from 1 April 2026 | Replaced | In force |
| Official citation | Act No. 43 of 1961 | Act No. 30 of 2025 |
| Came into force | 1 April 1962 | 1 April 2026 |
| Period concept | Previous year and assessment year (two terms) | Single Tax Year ✓ |
| Number of sections | Grew to a sprawling, heavily amended count ✗ | 536 sections, consolidated ✓ |
| Chapters | Many, after decades of insertions | 23 chapters ✓ |
| Schedules | Multiple | 16 schedules |
| Faceless assessment | Built up through later amendments ✗ | Written into the statute ✓ |
| Drafting style | Dense, proviso-heavy ✗ | Plainer language, tables for formulae ✓ |
| Tax rates and slabs | Set by annual Finance Act | Still set by annual Finance Act |
| Your tax liability on day one | Same numbers apply | Unchanged ✓ |

The single most common misreading of this table is the last row. People see a 536-section rewrite and assume their liability shifts. It does not. The structural columns change. The money column does not.

## What does not change

It is worth spelling out what stays put, because the headlines about a "new tax law" create a lot of needless worry.

Your tax rates do not change because of the 2025 Act. The slabs for the old regime and the new regime, the rebate, the surcharge thresholds, and the standard deduction are all creatures of the Finance Act passed each year. The 2025 Act provides the machinery, and the Finance Act fills in the numbers. So if your liability changes for the year starting April 2026, that will be because of the relevant Finance Act, not because the principal Act was rewritten.

Familiar deductions and exemptions carry forward in substance. The kinds of relief taxpayers rely on, such as the deduction for specified investments and the relief on home-loan interest, continue to exist under the new structure. What changes is where they sit in the book and what number they carry, not whether they exist.

The fundamentals of how income is classified also survive. Salary, house property, profits from business or profession, capital gains, and income from other sources remain the heads of income. The new Act reorganises and renumbers the provisions around them, but a salaried taxpayer still reports salary and a trader still reports business income.

Refunds, advance tax, TDS, and the assessment machinery continue to operate. The plumbing has been relabelled, not ripped out. If you understood how a refund worked under the 1961 Act, you understand how it works under the 2025 Act, with new section numbers attached.

## Faceless assessment, now in the statute

Faceless assessment changed how the department interacts with taxpayers. Instead of a jurisdictional officer you could visit, your assessment is allocated through an automated system, communication happens electronically, and the identity of the assessing officers is not disclosed to you. It was designed to cut down on face-to-face discretion and the problems that came with it.

Under the 1961 Act, the faceless scheme was layered on through later amendments and notified schemes. The 2025 Act brings the faceless approach into the body of the statute rather than leaving it to bolt-on provisions. For a taxpayer, the practical experience of a faceless assessment does not change overnight. For anyone reading the law, the difference is that the framework now reads as part of the core Act.

This matters for advocates and chartered accountants who cite the enabling provisions in replies and appeals. The authority you point to in a faceless assessment matter will carry a 2025 Act section number for proceedings governed by the new Act. Make sure your templates do not keep quoting the old section out of habit.

## Virtual digital assets and undisclosed income

The 2025 Act reflects the reality that wealth now sits in places the 1961 drafters never imagined. Virtual digital assets, the statutory label that covers crypto-assets and similar holdings, are brought squarely within the scope of the provisions dealing with undisclosed income and search-and-seizure. In plain terms, a virtual digital asset can be treated as undisclosed income where it is not properly accounted for, and it falls within what authorities can look at during a search.

This is consistent with the direction Indian tax policy already took when it introduced a specific regime for taxing income from virtual digital assets. The 2025 Act keeps that policy intact and makes sure the enforcement provisions name these assets clearly. If your practice touches clients who hold or trade crypto-assets, this is the part of the Act to read closely against the primary text, because it affects disclosure obligations and exposure during proceedings.

## How renumbering affects your documents and citations

Here is the quiet operational headache of any statutory rewrite. Every template, every precedent, and every citation that names a section of the 1961 Act now points to a provision in a statute that, for periods governed by the new Act, has been replaced.

Think about what carries those references. Engagement letters. Tax opinions. Reply drafts to notices. Appeal grounds. Internal compliance checklists. Standard operating procedures inside finance teams. Each of them may name a 1961 Act section by number. When you act for a period governed by the 2025 Act, the correct reference is the corresponding 2025 Act provision, and you cannot assume the number stayed the same, because for most provisions it did not.

There is a real risk in citing the wrong Act for the wrong year. A reply that quotes a 1961 section for a Tax Year governed by the 2025 Act looks careless at best and can confuse the issue at worst. The discipline here is the same discipline you apply when you [check whether a provision is still good law](/blog/good-law-checking) before you rely on it. You verify which statute governs the period in front of you, then you cite the provision from that statute.

This is also the moment to be wary of secondary write-ups that map old sections to new ones. Those mapping tables are useful, but they are someone's reading of the Act, not the Act. Confirm the destination provision against the primary text on the income-tax portal or India Code before you put a number in a document a client will rely on.

## Which Act governs which year

The transition rule is simpler than it sounds, and a short reference keeps you out of trouble.

| Income earned in | Governing Act | Cite section numbers from |
|---|---|---|
| FY 2025-26 or earlier (up to 31 March 2026) | Income-tax Act, 1961 | the 1961 Act |
| FY 2026-27 onward (from 1 April 2026) | Income-tax Act, 2025 | the 2025 Act |

Walk through it with a concrete example. Income you earned in the financial year that ran from 1 April 2025 to 31 March 2026 was earned before the new Act came into force. That income is governed by the 1961 Act, and the return you file for it, in the period that the old law called assessment year 2026-27, still belongs to the old regime. Reach for 1961 Act section numbers there.

Now take income earned in the financial year starting 1 April 2026. That is the first Tax Year under the new Act. Everything about it, including the return you eventually file, is governed by the Income-tax Act, 2025. Use 2025 Act provisions for that period.

For a stretch of time, both Acts are live in your working life. You will be closing out matters under the 1961 Act while opening matters under the 2025 Act. Keep the two clearly separated by the period each one governs, and you avoid the most common transition error.

## A pre-April 2026 checklist

If you advise on tax, or you run a finance function, the months before April 2026 are for housekeeping. None of this is glamorous. All of it saves you from avoidable mistakes once the new Act is live.

1. **Inventory your templates.** Pull every document that cites a 1961 Act section by number: opinions, replies, engagement letters, appeal grounds, internal checklists. List them. You cannot fix what you have not found.
2. **Map the provisions you use most.** Identify the ten or fifteen sections you cite repeatedly and find their 2025 Act equivalents in the primary text. Verify each one against the income-tax portal, not a blog table.
3. **Switch your vocabulary to Tax Year.** Update working papers, client communications, and internal notes to use Tax Year for periods from 1 April 2026 onward. Brief junior staff so they stop saying "assessment year" out of habit.
4. **Confirm your software roadmap.** Ask your tax-filing and accounting vendors when their products move to 2025 Act references and updated return forms. Do not assume the switch is automatic.
5. **Separate live matters by period.** For any ongoing matter, write down which Act governs it based on the year of the income. Tag old-regime matters and new-regime matters distinctly.
6. **Train the team on the transition rule.** Make sure everyone who drafts can answer one question without hesitation: which Act governs the year in front of me?
7. **Keep the primary text within reach.** Bookmark the consolidated Act on the income-tax portal and on India Code so verification is a click away when a number is in doubt.

A finance team that does this quietly in the first quarter of 2026 will barely notice the changeover. A team that skips it will spend the year correcting citations after the fact.

## How Niyam helps you track the transition

This is exactly the kind of moment where grounded legal AI earns its place. When a statute of this size is replaced, the slow and error-prone work is confirming which provision governs which period and pulling the correct text every time you cite it.

Niyam is built for Indian law, with answers grounded in a corpus of 72,000+ Indian judgments and the statutes those judgments interpret, and every answer carries a citation you can open and check. That last part is the point. The risk in any AI-assisted tax research is a confidently wrong section number, which is the same failure mode we wrote about in [AI legal research without hallucinated citations](/blog/ai-legal-research-india). You manage it the same way here. You ask the question, you read the cited provision, and you verify it against the primary text before it goes in a document.

The transition to the 2025 Act sits alongside the other large statutory changeover already underway in Indian practice, the shift to [the new criminal laws that replaced the IPC, CrPC, and Evidence Act](/blog/new-criminal-laws-bns-bnss-bsa). Two principal codes, rewritten and renumbered, live at the same time. The skill that gets you through both is identical. Verify the governing law for the period, then cite from it. If you want to build that habit at the level of an individual judgment, our guide on [how to read and brief an Indian judgment](/blog/how-to-read-a-judgment) walks through it.

## Frequently asked questions

### What is the Income-tax Act, 2025?

It is the new principal direct-tax statute for India, passed by Parliament in August 2025 and labelled Act No. 30 of 2025. It comes into force on 1 April 2026 and replaces the Income-tax Act, 1961. It is a structural rewrite of the law rather than a change to tax rates.

### When does the Income-tax Act, 2025 come into force?

1 April 2026. The Act fixes that commencement date itself. Income earned in the financial year starting on that date, the first Tax Year, is governed by the new Act.

### Does the Income-tax Act, 2025 change my tax rates?

No. Tax rates, slabs, surcharge, rebate, and the standard deduction are set by the annual Finance Act, not by the principal Act. The 2025 Act provides the machinery, and the Finance Act fills in the numbers, exactly as under the 1961 regime.

### What is a Tax Year under the new Act?

The Tax Year is the financial year from 1 April to 31 March. It replaces the old pair of terms, "previous year" and "assessment year," with a single period. You earn income in a Tax Year and are taxed for that same Tax Year.

### Why did the government replace the 1961 Act instead of amending it?

The 1961 Act had absorbed six decades of amendments and had become dense and hard to read. The rewrite consolidates and simplifies the language, reorganises provisions, and removes accumulated clutter, while keeping the substantive policy in place.

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

The Act runs to 536 sections, arranged in 23 chapters, with 16 schedules. The government's stated aim was to roughly halve the word count of the 1961 Act through plainer drafting.

### Will my deductions like Section 80C disappear?

No. The kinds of relief taxpayers rely on continue to exist under the new structure. What changes is where a provision sits in the statute and the number it carries, not whether the relief survives. Verify the new reference against the primary text before citing it.

### Which Act applies to income I earned in FY 2025-26?

The Income-tax Act, 1961. That income was earned before the 2025 Act came into force, so the old Act governs it, including the return you file for that year. Use 1961 Act section numbers for that period.

### Which Act applies to income I earn from 1 April 2026?

The Income-tax Act, 2025. The financial year starting 1 April 2026 is the first Tax Year under the new Act, and everything about that period, including the eventual return, is governed by the new statute.

### Do I need to file a different kind of return?

The return forms are being updated to reflect the new Act's vocabulary and section numbers. The act of filing does not fundamentally change. Confirm the updated forms through your software vendor and the income-tax portal when they are notified.

### Was the Income-tax Act, 2025 reviewed by Parliament?

Yes. A draft Bill introduced in February 2025 was referred to a Select Committee of the Lok Sabha chaired by Baijayant Panda. The government then brought a revised Bill incorporating the committee's recommendations, which both Houses passed in August 2025.

### What happens to faceless assessment under the new Act?

The faceless approach, which allocates assessments through an automated system and keeps the assessing officers' identities undisclosed, is written into the body of the 2025 Act rather than layered on through later schemes. For taxpayers, the day-to-day experience does not change overnight.

### How does the new Act treat crypto and virtual digital assets?

Virtual digital assets are brought within the scope of the provisions on undisclosed income and search-and-seizure. An improperly accounted virtual digital asset can be treated as undisclosed income and can be examined during a search. The specific taxing regime for income from these assets continues.

### Do I need to re-do my existing tax documents?

You need to review them. Any template, opinion, or reply that cites a 1961 Act section by number should be checked, and the correct 2025 Act provision substituted for periods governed by the new Act. Build an inventory of those documents before April 2026.

### Where can I read the official text of the Income-tax Act, 2025?

The consolidated Act is published on the income-tax department portal at incometax.gov.in and in the official statute database at India Code, indiacode.nic.in. Clause-by-clause analysis is available from PRS Legislative Research.

### Is a mapping table from old sections to new sections reliable?

Mapping tables are useful as a starting point, but they are someone's reading of the Act, not the Act. Always confirm the destination provision against the primary text before you put a section number in a document a client will rely on.

### Does the 2025 Act change capital gains taxation?

The heads of income, including capital gains, continue under the new structure. Rate and policy questions for capital gains are still settled by the Finance Act. The 2025 Act reorganises and renumbers the relevant provisions rather than rewriting the policy.

### What should a finance team do before 1 April 2026?

Inventory templates that cite 1961 Act sections, map the most-used provisions to their 2025 Act equivalents, switch working vocabulary to Tax Year, confirm the software vendor's roadmap, separate live matters by the period each Act governs, and keep the primary text bookmarked for verification.

### Will both Acts be in force at the same time?

In practice, yes, for a transition period. You will close out matters governed by the 1961 Act while opening matters governed by the 2025 Act. Keep them separated by the period each one governs, identified by the year in which the income was earned.

### Does the new Act affect TDS and advance tax?

The machinery for TDS, advance tax, and refunds continues to operate. The provisions have been relabelled and renumbered, not removed. If you understood how these worked under the 1961 Act, you understand them under the 2025 Act with updated references.

### How do I avoid citing the wrong Act in a reply or appeal?

Answer one question before you cite anything: which Act governs the period in front of me? If the income was earned before 1 April 2026, cite the 1961 Act. If it was earned from that date onward, cite the 2025 Act. Then verify the exact provision against the primary text.

## Key takeaways

The Income-tax Act, 2025 is the most significant restructuring of Indian direct-tax law in over sixty years, and yet the most important thing to understand about it is restraint. It changes the architecture of the law without changing what you owe on day one. The 536 sections, the 23 chapters, the single Tax Year, and the statutory faceless framework are real and they matter for how you read and cite the law. Your rates, your slabs, and your deductions still arrive through the Finance Act.

For anyone who advises on tax or runs a finance function, the work between now and the changeover is unglamorous and essential. Inventory what cites the old Act. Map the provisions you use to their new homes. Switch to Tax Year language. Above all, learn the transition rule cold, because the single biggest risk in 2026 is citing the wrong Act for the wrong period. Income earned through 31 March 2026 belongs to the 1961 Act. Income earned from 1 April 2026 belongs to the 2025 Act.

When you need to confirm which provision governs a period and pull the exact text behind it, that is the kind of grounded, citation-first research Niyam was built for. [Start for ₹100](https://app.niyam.ai/register) and put the transition on a footing you can verify.