Sections 1 and 3 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 1 gives the Act its name, says where it extends and fixes when it comes into force. Section 3 defines "tax year", the period in which income is measured throughout the Act. This article explains both, as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, and keeps to the words of the text. Anyone preparing a return will meet the tax year first, so our income tax return filing team starts there too.
The Act may be called the Income-tax Act, 2025 and extends to the whole of India. Save as otherwise provided in the Act, it comes into force on the 1st April, 2026. A tax year is the twelve months period of the financial year commencing on the 1st April. For a business or profession newly set up, or a source of income newly coming into existence, the tax year is a shorter period that starts on the date of setting up or of coming into existence and ends with that financial year.
Section 1: short title, extent and commencement
Section 1 has three sub-sections, each doing one job.
| Sub-section | What it says |
|---|---|
| Section 1(1) | The Act may be called the Income-tax Act, 2025 |
| Section 1(2) | It extends to the whole of India |
| Section 1(3) | Save as otherwise provided in the Act, it comes into force on the 1st April, 2026 |
Short title (section 1(1)). This is simply the name by which the statute is cited. When a notice, an order or a return refers to "the Act" in this cluster of articles, it means this Act and no other.
Extent (section 1(2)). The Act extends to the whole of India. The sub-section does not list any territory as excluded. For the charge of tax and its scope, see our note on Section 4, the charging section and the post on Section 6 and residential status.
Commencement (section 1(3)). The sub-section reads: "Save as otherwise provided in this Act, it shall come into force on the 1st April, 2026." Two points follow from the words themselves.
- The general date is the 1st April, 2026.
- The opening words, "save as otherwise provided in this Act", mean that a provision of the Act can carry a different date. Where it does, the date printed in that provision governs for that provision. This article does not state any such date because sections 1 and 3 do not print one.
The Act was amended by the Finance Act, 2026. The consolidated text consulted for this article is the Act as amended by the Finance Act, 2026; the commencement words of section 1(3) are the same as in the Act as it was first enacted. For the way the transition provisions work, see our overview of the effective date and transition provisions.
Section 3: what is a "tax year"?
Section 3 is headed "Definition of 'tax year'" and has two sub-sections.
Section 3(1): the general rule
"For the purposes of this Act, 'tax year' means the twelve months period of the financial year commencing on the 1st April."
Three things are worth noting.
- The definition is built on the financial year. The text of section 3 does not define the term "financial year" itself; it uses it as a known period.
- The tax year is a twelve months period.
- It begins on 1 April. Under the general rule, the tax year is therefore the full financial year that starts on that date.
This article uses the Act's own term, "tax year", throughout.
Section 3(2): a business or source of income that starts part-way
Section 3(2) deals with the case where the twelve-month rule would not fit. It applies "in the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year". The tax year is then "the period beginning with" one of two dates and "ending with the said financial year":
| Case | The tax year begins on | It ends |
|---|---|---|
| Business or profession newly set up (section 3(2)(a)) | The date of setting up of the business or profession | With the financial year in which it was set up |
| Source of income newly coming into existence (section 3(2)(b)) | The date on which the source of income newly comes into existence | With the financial year in which it came into existence |
So the tax year for a new business is not extended back to 1 April. It is the shorter period from the start date to the end of that financial year.
Worked example: a new consultancy
Meera sets up a consultancy on 10 August 2026. That date falls in the financial year commencing on 1 April 2026, which ends on 31 March 2027.
- Under section 3(2)(a), the tax year for the consultancy begins on 10 August 2026, the date of setting up.
- It ends with the financial year, on 31 March 2027.
- Counting the days: 22 days in August (10th to 31st), 30 in September, 31 in October, 30 in November, 31 in December, 31 in January, 28 in February 2027 and 31 in March. That is 22 + 30 + 31 + 30 + 31 + 31 + 28 + 31 = 234 days.
For her next tax year, the general rule of section 3(1) applies again: the twelve months period of the financial year commencing on 1 April 2027.
Worked example: a source of income that arises later
Rohan has run a trading business for years. On 1 December 2026 he buys a let-out shop, so a new source of income comes into existence on that date. Under section 3(2)(b), the tax year for that new source begins on 1 December 2026 and ends on 31 March 2027. The text of section 3 does not say how this part-year is combined with the full tax year of his existing business; it is silent on that point, and other provisions of the Act must be read for it.
Who is affected?
- Every person and every assessee, because the Act measures income by reference to a tax year. The term "assessee" is defined in section 2; see our articles on the definitions in section 2, starting with the definitions from "accountant" to "business trust".
- New businesses and professionals, who may have a tax year shorter than twelve months in their first year.
- Anyone reading dates in the Act, since a reference to a tax year in another section takes the meaning given here.
What the text does not say
Sections 1 and 3 do not prescribe any rate, due date, form or penalty. The detail of returns and payments lies elsewhere in the Act and in the Income-tax Rules, 2026; the detail is left to the rules where the Act says "as may be prescribed". The text consulted does not include later notifications.
Need help with your return for the right tax year?
Knowing which tax year an income belongs to is the first step in preparing a correct return, especially in the year a business starts. If you want the position checked for your own case, see our income tax return filing service for support from a CA team.
Key takeaways
- The Act is the Income-tax Act, 2025, extending to the whole of India.
- Save as otherwise provided, it came into force on 1 April 2026 (section 1(3)).
- A tax year is the twelve months of the financial year commencing on 1 April (section 3(1)).
- A newly set up business or profession, or a newly arising source of income, has a tax year that starts on that date and ends with the financial year (section 3(2)).
- "Tax year" is the Act's own term for the period in which income is measured.
- Always check later amendments, rules and notifications before acting.
Read next
- Section 4 of the Income-tax Act, 2025: the charging section
- Section 6: residential status
- Sections 7, 8 and 10: income deemed to be received and spouses under the Portuguese Civil Code
- Effective date and transition provisions
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.