Two Acts, One Year: What the Income-tax Act 2025 Changes
The new Act is a re-enactment rather than a reform. Most of the substantive law survived; the drafting, the structure and the numbering did not. That makes it deceptively easy to get wrong, because a page that looks correct can be citing a section that no longer governs the period it is talking about.
- What commenced, when, and by what instrument
- The tax year concept and what it replaced
- How the transition provisions allocate a period to an Act
- A section mapping table, with confidence marked
And an instrument that does not exist
The Income-tax Act 2025 is Act 30 of 2025. The original Bill of February 2025 was withdrawn in August 2025 after a select committee returned a large number of recommendations, and a second Bill was passed on 12 August 2025 and received assent on 21 August 2025. It came into force on 1 April 2026.
There is no separate commencement notification, and there does not need to be one. Section 1(3) brings the Act into force directly on 1 April 2026, so commencement is automatic under the enacted provision rather than conditional on the government notifying it. A page or a letter that cites a commencement notification number for this Act is citing something that does not exist. That is about the Act as a whole: notifications have of course been issued under the Act for rules, forms and particular administrative matters.
The Income-tax Rules 2026 were notified on 20 March 2026 and are effective from 1 April 2026, replacing the 1962 Rules for periods governed by the new Act. Draft rules and forms had been circulated for comment in February 2026.
The structure changed substantially: 536 sections against 819, 23 chapters, 16 schedules against 14, rules down from 511 to 333, and forms down from 399 to 190. That last figure is the one that catches practitioners, because it means most surviving forms were renumbered rather than retained.
One concept replacing two
The Act abolishes the paired concepts of previous year and assessment year and substitutes a single tax year, defined in section 3 as the twelve-month period of the financial year commencing on 1 April, with a shortened first tax year for a newly set up business or source. Tax year 2026-27 is FY 2026-27. There is no separate assessment year.
The old vocabulary does not disappear. It continues to apply to every period governed by the 1961 Act, which means assessment year language will be correct and necessary for years to come. Using it for a 2026-27 period is wrong; abandoning it entirely is also wrong.
Which Act governs what
The transition sits in section 536, the repeal and savings provision, which has twenty-two sub-clauses and is backed by the General Clauses Act residually. The Board has published transition guidance, including a long set of frequently asked questions on the interplay between the two Acts, which we read during this build, and a further set in July 2026.
| Situation | Which Act applies |
|---|---|
| FY 2025-26 income, assessment year 2026-27 | The 1961 Act, end to end, even though the return is filed after 1 April 2026. |
| A proceeding pending on 1 April 2026 | Continues under the 1961 Act as if it had not been repealed. |
| A proceeding initiated after 1 April 2026 relating to a pre-2026 period | Also carried out under the repealed Act. This is the sub-clause most likely to be missed. |
| A right of appeal or revision whose limitation had already expired | Not revived by the new Act. |
| Withholding | Follows the date of payment or credit, not the year of the income. Paid or credited to 31 March 2026 uses 1961 Act codes; from 1 April 2026 the new codes must be quoted or the portal rejects the statement. |
| A lower or nil deduction certificate issued under section 197 of the 1961 Act | Remains valid for payments or credits made on or after 1 April 2026 where it was issued in respect of projected receivables for tax year 2026-27. Fresh applications for that year are made in Form 128 under section 395(1) of the 2025 Act, replacing Form 13. Questions 4.10 and 4.11 of the Board transition FAQs. The rule does not extend a certificate whose own stated validity ended on 31 March 2026 |
| Losses and unabsorbed depreciation determined under the 1961 Act | Carry forward seamlessly. The carry-forward clock does not restart. |
| Existing registrations and approvals | Survive so far as not inconsistent. |
What became what
This table is the working reference. The mappings below have been checked directly against the Income-tax Act, 2025 as amended by the Finance Act, 2026. Where an old section has no one-for-one successor, the entry says so rather than forcing a pair.
| Concept | 1961 Act | 2025 Act |
|---|---|---|
| Charge of income tax | Section 4 | Section 4 |
| Income deemed to accrue in India, including significant economic presence | Section 9 | Section 9 |
| Carry forward following change in shareholding | Section 79 | Section 119, particularly the company shareholding provisions within it |
| Rebate | Section 87A | Section 156 |
| Eligible start-up deduction | Section 80-IAC | Section 140 |
| Reference to the transfer pricing officer | Section 92CA | Section 166 |
| Safe harbour, enabling power | Section 92CB | Section 167 |
| Accountant's report on international and specified domestic transactions | Section 92E | Section 172 |
| Thin capitalisation | Section 94B | Section 177 |
| General anti-avoidance rule | Sections 95 to 102 | Sections 178 to 184, the complete substantive chapter |
| Concessional corporate regime | Section 115BAA | Section 200 |
| New manufacturing regime | Section 115BAB | Section 201 |
| Default personal regime | Section 115BAC | Section 202 |
| Minimum alternate tax | Section 115JB | Section 206(1). Section 206 also carries alternate minimum tax, at 206(2) |
| Company-level buyback distribution tax | Section 115QA | No direct successor. Not carried forward. Buybacks from 1 April 2026 are governed principally by section 69, which taxes the shareholder under the capital gains framework and adds income-tax in specified promoter cases |
| Return of income | Section 139 | Section 263 |
| Faceless assessment | Section 144B | Section 273 |
| Income escaping assessment | Section 147 | Section 279 |
| Reassessment notice | Section 148 | Section 280 |
| Inquiry and opportunity before the reassessment notice | Section 148A | Section 281 |
| Time limit for the reassessment notice | Section 149 | Section 282 |
| Withholding from salary | Section 192 | Section 392 |
| Withholding from other payments | Sections 193 to 196D | Section 393. A consolidation rather than a one-for-one mapping |
| Higher rate for specified non-filers | Sections 206AB and 206CCA | Omitted, no successor |
| Tax collection at source | Section 206C | Section 394 |
| Dispute resolution committee | Section 245MA | Section 379 |
| Appealable orders at first appeal | Sections 246 and 246A | Sections 356 and 357 |
| Complete first-appeal procedure and powers | Sections 246, 246A and 249 to 251 | Sections 356 to 360 |
| Appellate Tribunal framework | Sections 252 to 255 | Sections 361 to 364 |
| Orders of the Appellate Tribunal | Section 254 | Section 363 |
| Appeal to the High Court | Section 260A | Section 365 |
| High Court bench | Section 260B | Section 366 |
| Appeal to and hearing before the Supreme Court | Sections 261 and 262 | Sections 367 and 368 |
| Revision, prejudicial to revenue | Section 263 | Section 377 |
| Revision in favour of the assessee | Section 264 | Section 378 |
| Under-reporting and misreporting penalty | Section 270A | Section 439 |
| Country by country report | Section 286 | Section 511 |
| Repeal and savings | Not applicable | Section 536 |
Checked against the Income-tax Act, 2025 as amended by the Finance Act, 2026 by our subject matter expert on 17 September 2026. Two rows are worth reading twice. Section 366 is the High Court bench, succeeding section 260B, and is not the Supreme Court provision; the Supreme Court sits at sections 367 and 368. And section 115QA has no successor at all rather than a renumbered one.
Where to go next
Direct Taxation
Back to the main page: compliance, litigation and strategy, how we work, and how to reach us.
Compliance: Returns, Withholding and the New Form Numbers
Return due dates for the year being filed now, the updated return window, the 2025 withholding rationalisation that removed two compliance checks entirely, and the form renumbering that catches everyone.
Assessment, Reassessment and the Faceless Process
How an assessment reaches you, what the faceless process changed about responding to it, the reassessment time limits after they were cut, and the closed list of things that can now reopen a year.
Disputes: Appeals, Penalties and Where a Case Is Actually Won
The appellate hierarchy, the monetary limits that decide whether the department appeals at all, the small-case resolution route, the penalty provisions, and the prosecution offences that were softened in 2026.
Planning, Anti-avoidance and Cross-border Positions
Rates and concessional regimes, the general anti-avoidance rule and its grandfathering, treaty positions including the Mauritius protocol that is still not in force, the abolished equalisation levy, and where India actually stands on global minimum tax.
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If you have a position taken in an earlier year that you are carrying forward, the useful check is whether it survives the transition intact. Most do. The ones that do not are worth finding early.
Position as at 16 September 2026. Reviewed every six months.
This page is general information, not professional advice. India is operating two income tax statutes at once. The Income-tax Act 1961 governs FY 2025-26 and everything before it, including assessments, appeals and updated returns for those years, which will run into the 2030s. The Income-tax Act 2025 came into force on 1 April 2026 and governs tax year 2026-27 onward, with every section renumbered and every form renumbered with them. A statement about Indian income tax that carries neither a year label nor an Act label is not a statement anyone can act on. Take professional advice before acting on anything on this page. We are happy to be that adviser, but we do not act on a web page, ours or anyone else's, without one.