Quick answer: The Income Tax Act, 2025 received Presidential assent on 21 August 2025 and took effect on 1 April 2026, replacing the Income Tax Act, 1961 after more than six decades. It reorganises the law into 536 sections across 23 chapters and 16 schedules, down from 819 sections and 47 chapters in the heavily-amended 1961 Act. The single biggest conceptual change is the replacement of the dual "Previous Year / Assessment Year" system with a single "Tax Year" running 1 April to 31 March. Crucially, the new Act is revenue neutral — no tax rates, slabs, surcharge, or cess changed. What changed is the structure: section numbers are renumbered, TDS provisions consolidated from 69 sections into 3, and dense legal prose replaced with 39 tables and 40 formulas. The 1961 Act still governs FY 2025-26 income (filed in AY 2026-27); the 2025 Act governs FY 2026-27 (Tax Year 2026-27) onwards.
Key takeaways
- The Income Tax Act, 2025 is structurally new but substantively the same — rates, slabs, and the regime framework are unchanged.
- "Tax Year" replaces the confusing "Previous Year" plus "Assessment Year" dual system — FY 2026-27 is now simply Tax Year 2026-27.
- Section numbers changed across the board: standard deduction moved from 16(ia) to 19, the new regime from 115BAC to 202, advance tax from 208 to 404.
- TDS was consolidated from 69 scattered sections into just 3 — Section 392 (salary), 393 (everything else), 394 (TCS).
- Forms were renamed: Form 16 becomes Form 130, Form 12BB becomes Form 124, Form 26AS becomes Form 168.
For sixty-four years, Indian income tax lived under a single statute — the Income Tax Act, 1961. Over those decades, the Act accumulated hundreds of amendments, dozens of new sections wedged in with letter suffixes (194-IA, 80CCD(1B), 115BAC), and layers of provisos and explanations that made even routine provisions difficult to read. By 2024, the law had swollen to 819 sections across 47 chapters, with cross-references that sent practitioners hunting through multiple sections to answer a single question. The Income Tax Act, 2025 is the government''s answer to that complexity — a structural rewrite that keeps the tax system intact while making the statute itself navigable.
This pillar article is the definitive reference for what changed and what didn''t. It covers the headline numbers and legislative history, the single biggest conceptual shift (the Tax Year), the comprehensive section-number mapping that practitioners and taxpayers need, the renamed forms, the genuinely substantive changes hiding among the renumbering, and the transition rules governing which Act applies to which year. Whether you''re a taxpayer trying to make sense of new section references on your ITR or a professional relearning the citations, this is the map. Use Ganak''s Income Tax Calculator to compute your liability — the underlying math is unchanged regardless of which Act governs.
The Headline: A Structural Rewrite, Not a Tax Change
The most important thing to understand about the Income Tax Act, 2025 is what it did not do: it did not change how much tax you pay. Tax rates, slabs, surcharge thresholds, the 4% Health and Education Cess, the new and old regime structures, capital gains rates, and the Section 87A rebate are all carried forward unchanged from the position that prevailed for FY 2025-26. The government explicitly described the exercise as "revenue neutral" — the goal was simplification of the statute, not adjustment of the tax burden.
What changed is the architecture. The numbers tell the story:
| Metric | Income Tax Act, 1961 (as amended) | Income Tax Act, 2025 |
|---|---|---|
| Sections | 819 | 536 |
| Chapters | 47 | 23 |
| Schedules | 14 | 16 |
| Tables | Minimal | 39 (new) |
| Formulas | Embedded in prose | 40 (explicit) |
| TDS provisions | 69 scattered sections | 3 consolidated sections |
| Word count | Roughly 5.1 lakh words | Roughly half |
The reduction from 819 to 536 sections — about 24% fewer — understates the simplification, because the new Act folds dense prose into tables and formulas. A provision that previously required reading three paragraphs of qualifications now appears as a table row. The TDS consolidation is the most dramatic example: 69 separate sections (192 through 194T plus 195 and the 206 series) collapsed into three parent sections with tabular sub-clauses.
The Legislative History
The path to the new Act spanned about 18 months. The original Income-tax Bill, 2025 was introduced in the Lok Sabha on 13 February 2025 and referred to a Select Committee chaired by MP Baijayant Panda, which reviewed the draft and recommended revisions. The original bill was withdrawn and replaced with a revised version — the Income-tax (No. 2) Bill, 2025 — which passed the Lok Sabha on 11 August 2025 and the Rajya Sabha on 12 August 2025. Presidential assent followed on 21 August 2025, and the Act came into force on 1 April 2026.
The CBDT framed the overhaul around what it called the "SIMPLE" objectives — streamlined structure, integrated provisions, minimised litigation, practical language, and digital efficiency. The emphasis on reducing litigation is notable: a large share of India''s tax disputes historically arose from ambiguous drafting and conflicting interpretations of scattered provisions. By integrating provisos and explanations directly into the main text and replacing prose with tables, the Act aims to reduce the interpretive gaps that fuelled decades of litigation.
The Single Biggest Change: The Tax Year
For most taxpayers, the most visible change is terminological. The 1961 Act used a dual-year system that confused taxpayers for generations: the "Previous Year" was the year in which income was earned, and the "Assessment Year" was the following year in which that income was assessed and the return filed. Income earned in FY 2024-25 (the Previous Year) was assessed in AY 2025-26 (the Assessment Year). The two-year vocabulary appeared on every notice, every return, and every piece of correspondence, and routinely confused people about which year was being discussed.
The Income Tax Act, 2025 abolishes this distinction. Section 3 introduces a single concept — the Tax Year — defined as the 12-month period from 1 April to 31 March. Income earned during Tax Year 2026-27 is reported and assessed with reference to that same Tax Year. There is no separate "assessment year" anymore.
The practical effect: FY 2026-27, which under the old vocabulary would have been "Previous Year 2026-27, Assessment Year 2027-28," is now simply "Tax Year 2026-27." When you file your return in July 2027 for income earned during 1 April 2026 to 31 March 2027, you''re filing for Tax Year 2026-27. The dual-year mental gymnastics are gone.
One transitional wrinkle worth noting: ITR forms for income earned in FY 2025-26 — filed during 2026 — still use the old Assessment Year 2026-27 framing, because that income falls under the 1961 Act. The Tax Year terminology applies to FY 2026-27 income onwards. For one filing cycle, both vocabularies coexist depending on which year''s income you''re reporting.
What Did Not Change
Before cataloguing the changes, it''s worth being explicit about the substantial body of tax law that carried forward unchanged. The new Act is a re-codification, not a reform of policy. Unchanged items include:
- Tax rates and slabs — both new and old regime slab structures are identical to FY 2025-26
- The Section 87A rebate — ₹60,000 (new regime, up to ₹12 lakh) and ₹12,500 (old regime, up to ₹5 lakh), now codified as Section 156
- Standard deduction — ₹75,000 (new regime) and ₹50,000 (old regime), now codified directly in the Act
- Capital gains rates — LTCG 12.5% above ₹1.25 lakh, STCG 20% on equity, the post-Budget-2024 structure intact
- The regime framework — new regime as default, old regime by election, same switching rules
- Deduction limits — Section 80C ceiling of ₹1.5 lakh, 80CCD(1B) additional ₹50,000, 80D health insurance limits, all unchanged in amount
- Surcharge and cess — surcharge thresholds and the 4% Health and Education Cess unchanged
- Residential status rules — the 182-day and 60-day tests, RNOR provisions, all carried forward
If you computed your tax correctly under the 1961 Act for FY 2025-26, the same computation produces the same answer under the 2025 Act for FY 2026-27. The arithmetic is identical; only the section citations differ.
The Comprehensive Section Mapping
This is the reference most practitioners and informed taxpayers will return to. The table below maps the commonly-cited provisions from the 1961 Act to their counterparts in the 2025 Act. Where multiple old sections were consolidated, the table notes the merger.
| Provision | Old Act (1961) | New Act (2025) |
|---|---|---|
| Tax Year definition | Section 3 (Previous Year) + Section 2(9) (Assessment Year) | Section 3 (unified Tax Year) |
| New tax regime | Section 115BAC | Section 202 |
| Section 87A rebate | Section 87A | Section 156 |
| Standard deduction (salary) | Section 16(ia) | Section 19 |
| HRA exemption | Section 10(13A) | Section 12 / Schedule II |
| House property income | Sections 22-27 | Sections 20-25 |
| Home loan interest (self-occupied) | Section 24(b) | Section 24 |
| Section 80C deductions | Section 80C | Section 123 r/w Schedule XV |
| NPS additional deduction | Section 80CCD(1B) | Section 124(3) |
| Medical insurance | Section 80D | Section 126 |
| Dependent with disability | Section 80DD | Section 127 |
| Specified disease treatment | Section 80DDB | Section 128 |
| Education loan interest | Section 80E | Section 129 |
| Home loan interest (additional) | Section 80EE / 80EEA | Section 130 / 131 |
| Electric vehicle loan interest | Section 80EEB | Section 132 |
| Donations | Section 80G | Sections 133-137 |
| Salary TDS | Section 192 | Section 392 |
| All non-salary TDS | Sections 193-194T, 195 | Section 393 (codes 1001-1067) |
| TCS | Section 206C | Section 394 |
| TDS certificate | Section 203 | Section 402 |
| Return filing | Section 139 | Section 263 |
| Inquiry before assessment | Section 142(1) | Section 268(1) |
| Interest — late filing | Section 234A | Section 423 |
| Interest — advance tax shortfall | Section 234B | Section 424 |
| Interest — instalment deferment | Section 234C | Section 425 |
| Late filing fee | Section 234F | Section 428(b) |
| Advance tax obligation | Section 208 | Section 404 |
| Advance tax instalments | Section 211 | Section 408 |
| Presumptive taxation | Section 44AD / 44ADA | Section 58 |
| Crypto/VDA tax | Section 115BBH | Section 115BBH (retained) |
| VDA TDS | Section 194S | Section 393 (code 1045) |
A few mappings deserve highlighting. The TDS consolidation (192-194T into 392-393) is the largest single reorganisation — the dedicated TDS rates pillar article covers the new payment-code system in detail. The interest provisions (234A/B/C) moving to the 420s is a clean sequential renumber. And Section 115BBH (the 30% crypto tax) is one of the few provisions that kept its old number — a deliberate choice given how recently it was introduced.
The Form Renaming
Alongside section renumbering, the IT Rules 2026 (the procedural rules under the new Act) redesigned and renamed most common forms. The substance of each form is largely unchanged — Form 130 collects the same information Form 16 did — but the names and some field structures are new.
| Purpose | Old Form | New Form |
|---|---|---|
| Salary TDS certificate (to employee) | Form 16 | Form 130 |
| Non-salary TDS certificate | Form 16A | Form 131 |
| Investment declaration (to employer) | Form 12BB | Form 124 |
| Quarterly salary TDS return | Form 24Q | Form 138 |
| Quarterly non-salary TDS return | Form 26Q | Form 140 |
| Consolidated tax credit statement | Form 26AS | Form 168 |
| No-TDS declaration (low income) | Form 15G / 15H | Form 121 |
| PAN-based TDS challan (property/rent/etc.) | Form 26QB / 26QC / 26QD / 26QE | Form 141 (unified) |
For most taxpayers, the form names appear automatically in the e-filing portal and payroll systems, so the renaming is mostly invisible. The exceptions are filers who reference forms by name in their own records or correspondence — a freelancer asking a client for "Form 16A" should now ask for "Form 131," and an employee submitting investment proofs files "Form 124" rather than "Form 12BB."
The Genuinely Substantive Changes
While the headline framing is "structural only," a handful of genuinely substantive changes are embedded in the new Act. These are worth knowing because they go beyond renumbering:
Faceless assessment gets statutory authority. Under the 1961 Act, faceless assessment operated under a scheme notified by the government — a delegated authority that some taxpayers challenged on procedural grounds. The 2025 Act gives faceless assessment direct statutory backing, reducing the scope for procedural challenges and cementing the digital-first, low-human-interface model the department has been building.
Presumptive scheme compliance relief. Under the new presumptive taxation provisions, businesses with turnover under ₹10 crore and cash receipts below 5% of turnover are exempt from maintaining books of account and undergoing tax audit. This is a meaningful compliance reduction for small and mid-sized businesses that operate largely through digital payments.
Pre-construction interest clarity. The new Act explicitly allows pre-construction period home loan interest to be deductible for both self-occupied and let-out (or deemed let-out) property. The 1961 Act''s treatment of pre-construction interest for let-out property was a frequent source of dispute; the new Act resolves it in the taxpayer''s favour with explicit language.
Commuted pension for non-employees. Non-employees (such as pensioners not drawing salary, or those receiving pension from a fund) can now claim the full commuted pension deduction without the restrictions that applied under the old Act.
Charitable trust consolidation. Everything previously scattered across Sections 11, 12, 12A, 12AA, 12AB, and parts of 80G — the entire framework governing charitable and religious trusts — is now consolidated into a single coherent chapter. For trusts and the professionals advising them, this is a significant readability improvement.
None of these changes alters the tax computation for an ordinary salaried taxpayer, but they matter for specific taxpayer categories — small businesses, property owners with under-construction loans, pensioners, and charitable institutions.
The Transition Rules: Which Act Governs Which Year
The cleanest way to understand the transition is by reference to the income year:
- FY 2025-26 income (and earlier): Governed by the Income Tax Act, 1961. Returns for FY 2025-26 are filed in AY 2026-27 (during 2026) under the old Act, using old section references and old form names. This is the final cycle under the 1961 Act.
- FY 2026-27 income (and later): Governed by the Income Tax Act, 2025. This is Tax Year 2026-27, with returns filed during 2027 under the new Act, using new section references and renamed forms.
The repeal of the 1961 Act does not disturb anything from earlier years. Assessments completed under the old Act remain valid. Pending proceedings — appeals, reassessments, rectifications relating to earlier years — continue under transitional provisions that preserve the old Act''s applicability to the years it governed. A scrutiny assessment for AY 2023-24, for example, proceeds under the 1961 Act even though that Act is now repealed for current purposes.
This means that for a period of several years, both Acts remain operationally relevant — the 2025 Act for current income, the 1961 Act for legacy assessments and disputes. Tax professionals will work with both frameworks simultaneously until the backlog of old-Act matters clears.
What Practitioners Need to Relearn (and What They Don''t)
For tax professionals and informed taxpayers, the practical question is what actually needs relearning. The honest answer: less than the scale of the rewrite suggests.
What needs relearning: Section citations. Anyone who quotes section numbers professionally — in returns, notices, advice, or documentation — needs to learn the new numbers. "Section 80C" becomes "Section 123 read with Schedule XV," "Section 234B interest" becomes "Section 424 interest," and so on. The mapping table above covers the common ones; the full mapping runs to 250+ provisions. For the first year or two, keeping a mapping reference handy is essential.
What needs relearning: Form names and the new TDS payment-code system. Filing TDS returns now requires the numeric payment codes (1001-1067) rather than section references. Payroll and accounting software has been updated, but manual filers and those who maintain their own records need to adapt.
What does NOT need relearning: The actual tax computation. Slab application, deduction limits, capital gains math, regime comparison, advance tax scheduling — all of it works exactly as before. A practitioner who understood how to compute tax under the 1961 Act already knows how to compute it under the 2025 Act. The skill transfers completely; only the vocabulary changes.
What does NOT need relearning: Planning strategy. Regime choice, deduction optimisation, the timing of investments, the structuring of capital gains — every planning technique that worked under the old Act works identically under the new one, because the underlying incentives are unchanged. The strategic content of the other articles in this hub — on regime choice, tax-saving investments, and advance tax — remains fully applicable, with only the section references updated.
Frequently Asked Questions
When did the Income Tax Act 2025 come into effect?
The Income Tax Act, 2025 received Presidential assent on 21 August 2025 and came into force on 1 April 2026. It governs income earned from FY 2026-27 (Tax Year 2026-27) onwards. The Income Tax Act, 1961 continues to govern income earned up to FY 2025-26 — so returns for FY 2025-26, filed during 2026 in AY 2026-27, still use the old Act. The 2025 Act applies to returns filed for FY 2026-27 income onwards, during 2027 and later.
Did tax rates change under the Income Tax Act 2025?
No. The Income Tax Act, 2025 is revenue neutral — tax rates, slabs, surcharge thresholds, the 4% Health and Education Cess, capital gains rates, and the Section 87A rebate are all identical to the position that prevailed for FY 2025-26 under the old Act. The new Act is a structural rewrite for simplicity and clarity, not a change to the tax burden. If you computed your tax correctly under the 1961 Act, the same computation produces the same result under the 2025 Act.
What is the Tax Year under the new Income Tax Act?
The Tax Year is a single 12-month period running from 1 April to 31 March, introduced by Section 3 of the Income Tax Act, 2025. It replaces the old dual-year system of "Previous Year" (year of earning) and "Assessment Year" (year of filing). Under the new system, income earned during Tax Year 2026-27 is reported and assessed with reference to that same year — there is no separate assessment year. FY 2026-27 is now simply Tax Year 2026-27, eliminating the longstanding confusion between the year of income and the year of assessment.
What is the new section number for Section 80C?
Under the Income Tax Act, 2025, the deductions formerly under Section 80C are now governed by Section 123 read with Schedule XV. The ₹1.5 lakh ceiling and the eligible investments (PPF, ELSS, EPF, life insurance, NSC, tax-saver FD, etc.) are unchanged — only the section reference moved. Several other common sections were also renumbered: Section 80D (medical insurance) became Section 126, Section 80CCD(1B) (NPS additional) became Section 124(3), and the new tax regime moved from Section 115BAC to Section 202.
How many sections does the Income Tax Act 2025 have?
The Income Tax Act, 2025 has 536 sections organised across 23 chapters and 16 schedules, down from 819 sections and 47 chapters in the heavily-amended Income Tax Act, 1961 — about a 24% reduction in sections. The new Act also introduces 39 tables and 40 formulas to replace dense legal prose, and consolidates the 69 scattered TDS provisions into just 3 sections (392, 393, 394). The overall word count is roughly half that of the old Act.
Do I need to file my old tax returns differently now?
No. Returns for income earned up to FY 2025-26 continue under the Income Tax Act, 1961, using the old section references, old form names, and the Assessment Year framing. The repeal of the 1961 Act does not disturb earlier years — completed assessments remain valid, and pending proceedings (appeals, reassessments) continue under transitional provisions. Only income earned from FY 2026-27 onwards is governed by the new Act. For one filing cycle, both frameworks coexist depending on which year''s income is being reported.
Does the new Income Tax Act change tax-saving strategies?
No. Every tax-planning technique that worked under the 1961 Act works identically under the 2025 Act, because the underlying tax incentives are unchanged. Regime choice, deduction optimisation, investment timing, capital gains structuring, and advance tax planning all function exactly as before — only the section references in documentation change. The ₹1.5 lakh Section 80C ceiling (now Section 123), the ₹50,000 NPS additional deduction (now Section 124(3)), and the health insurance limits (now Section 126) all retain their amounts and rules.
Sources and Further Reading
This pillar article is based on the Income Tax Act, 2025 (Presidential assent 21 August 2025, effective 1 April 2026) as amended by the Finance Act, 2026, and the CBDT''s official transition guidance. The Act is available on the official e-Gazette and the Income Tax Department portal. For official references:
- Income Tax Department — Objective and Scope of the New Act
- Income Tax India — Section-wise navigator and 1961-to-2025 mapping
- Income Tax e-Filing Portal — current forms and filing under the new Act
- Press Information Bureau — Income Tax Act 2025 enactment announcements
Last verified: 19 May 2026. This article will be updated as CBDT issues further transition clarifications and as the first full cycle of filing under the new Act surfaces practical issues.