India’s new Income Tax Act 2025 replaces the 1961 Act from April 1, 2026. Tax rates have not changed. What has changed is the structure, language, and some important rules around filing deadlines, TDS, and digital records.
This guide covers everything that actually affects you whether you are salaried, a business owner, an MSME, or an investor.
Especially important if you file ITR-3, ITR-4, trade in F&O, or run a business.
Quick Summary What Changed from April 1, 2026
| What Changed |
What It Means for You |
| New Income Tax Act 2025 is now live |
Same taxes, simpler law |
| Tax Year replaces Assessment Year |
Less confusion when filing ITR |
| ITR-3 & ITR-4 deadline extended |
Business owners get until August 31 |
| Revised return window extended |
12 months to correct your ITR (was 9) |
| TDS sections consolidated |
Easier to find your applicable TDS rate |
| Tax rates & slabs unchanged |
No new tax burden |
What is the New Income Tax Act 2025?
The Income Tax Act 2025 is India’s new direct tax law. It replaces the Income Tax Act 1961, which had been in use for over 60 years.
The old law had grown too complex amended thousands of times, full of outdated sections, and difficult to understand even for professionals. The new Act simplifies the language and structure without changing any tax rates or deductions.
The key point: Nothing changes for your tax liability. Everything changes in how the law is written and how you file.
| |
Old Act (1961) |
New Act (2025) |
| In force since |
1962 |
April 1, 2026 |
| Total sections |
819 |
536 |
| Language |
Complex |
Simple, modern |
| Tax rates |
— |
Unchanged |
What is the Tax Year Concept?
Earlier, India’s tax law used two different terms:
- Previous Year — the year you earned income
- Assessment Year — the next year when you filed and paid tax
The new Act replaces both with one simple term: Tax Year.
A Tax Year runs from April 1 to March 31 same as the financial year.
Example: Tax Year 2026-27 = income earned from April 1, 2026 to March 31, 2027. ITR for this will be filed in 2027.
| Situation |
Terminology Used |
| Filing ITR for FY 2025-26 in 2026 |
Still called AY 2026-27 (old Act applies) |
| Filing ITR for income from April 2026 |
Called Tax Year 2026-27 (new Act applies) |
Income Tax Slabs for Tax Year 2026-27
Tax rates are unchanged. The new tax regime is the default.
New Tax Regime (Default)
| Income |
Tax Rate |
| Up to ₹4,00,000 |
NIL |
| ₹4L – ₹8L |
5% |
| ₹8L – ₹12L |
10% |
| ₹12L – ₹16L |
15% |
| ₹16L – ₹20L |
20% |
| ₹20L – ₹24L |
25% |
| Above ₹24L |
30% |
Old Tax Regime (Optional)
| Income |
Tax Rate |
| Up to ₹2,50,000 |
NIL |
| ₹2.5L – ₹5L |
5% |
| ₹5L – ₹10L |
20% |
| Above ₹10L |
30% |
Is ₹12 Lakh Salary Tax-Free in 2026?
Yes but only under the new tax regime.
The Section 87A rebate has been increased to ₹60,000. If your taxable income is up to ₹12 lakh, your full tax liability is wiped out by this rebate.
For salaried employees:
| |
Amount |
| Gross Salary |
₹12,75,000 |
| Standard Deduction |
₹75,000 |
| Taxable Income |
₹12,00,000 |
| Tax on ₹12L |
₹60,000 |
| Section 87A Rebate |
₹60,000 |
| Tax Payable |
₹0 |
Note: Income above ₹12 lakh gets no rebate — full tax applies from ₹1.
| |
New Regime |
Old Regime |
| 87A Rebate |
₹60,000 |
₹12,500 |
| Zero Tax Limit |
₹12L |
₹5L |
| Zero Tax (Salaried) |
₹12.75L |
₹5.5L |
Old vs New Regime Which Saves You More Tax?
| Annual Income |
Old Regime Tax |
New Regime Tax |
Better Option |
| ₹10,00,000 |
₹1,17,000 |
₹60,000 |
New Regime |
| ₹15,00,000 |
₹1,95,000 |
₹1,50,000 |
New Regime |
| ₹15L (with ₹3.5L deductions*) |
₹1,17,000 |
₹1,50,000 |
Old Regime |
| ₹20,00,000 |
₹3,57,000 |
₹2,10,000 |
New Regime |
*₹1.5L under 80C + ₹2L home loan interest
Simple Rule:
- No major deductions → New Regime
- Home loan + 80C investments above ₹3 lakh → Old Regime may save more
Key Changes in Income Tax Act 2025
| Change |
Before |
After |
Who It Affects |
| ITR-3/4 Deadline |
July 31 |
August 31 |
Business owners |
| Revised Return Window |
9 months |
12 months |
All filers |
| TDS Sections |
Scattered (192–194T) |
Consolidated (392–393) |
All businesses |
| STT on Futures |
0.02% |
0.05% |
F&O traders |
| STT on Options |
0.1% |
0.15% |
Options traders |
| Share Buyback Tax |
Dividend (slab rate) |
Capital gains |
Investors |
| Standard Deduction |
₹50,000 |
₹75,000 |
Salaried |
| Senior Citizen TDS Limit |
₹50,000 |
₹1,00,000 |
Senior citizens |
| MAT Rate |
15% |
14% |
Companies |
F&O Impact Example: ₹1 crore futures sell STT was ₹2,000, now ₹5,000. Extra cost: ₹3,000 per crore.
Virtual Digital Space New Powers for Tax Authorities
Tax authorities can now legally access your digital accounts during search proceedings:
- Email accounts
- Social media accounts
- Online trading accounts
- Cloud storage
Note: Forcibly overriding passwords was proposed but removed from the final Act.
What you should do:
- Keep digital records consistent with your ITR
- Ensure GST turnover and ITR income match
- Maintain proper bookkeeping on all platforms
Tax Year 2026-27 Action Checklist
| Who |
What to Do |
| Everyone |
Use Tax Year instead of Assessment Year |
| Salaried |
Check if old or new regime saves more tax |
| Business owners |
Note new ITR deadline August 31 |
| All filers |
You have 12 months to file revised return |
| F&O traders |
Factor in higher STT in your cost calculations |
| Investors |
Share buyback now taxed as capital gains |
| Businesses |
Review TDS under new Sections 392 & 393 |
| Everyone |
Ensure digital records match your ITR |
Frequently Asked Questions
Q: Are tax rates changed under the new Act?
No. All tax rates and deductions remain exactly the same.
Q: Which ITR act applies for FY 2025-26?
Old Act (1961). New Act applies only from Tax Year 2026-27 onwards.
Q: Can I still choose the old tax regime?
Yes. New regime is default but old regime remains available.
Q: What is the last date to file revised return?
12 months from end of Tax Year. Fee applies in last 3 months.
Q: My GST turnover and ITR income are different is that a problem?
Yes. Significant mismatches can trigger a tax notice. Always reconcile before filing.
Q: Is ₹12 lakh salary completely tax-free?
Yes under new regime only. For salaried employees, effective limit is ₹12.75 lakh after standard deduction.
About the Author
Paras Nagpal
Indirect Tax Specialist, GetMyCA
Email: [email protected] | Phone: +91 87500 70012
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Tax laws and rules are subject to amendments.
About GetMyCA
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