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Guide · Income Tax

The Income-tax Act, 2025 — A New Law, Not New Taxes

The Income-tax Act, 2025 replaces the 60-year-old 1961 Act from 1 April 2026. It is a clean-language recodification — same slabs, same deductions, renumbered sections. Here is exactly what changes, when it applies and how the old sections map across.

Written by: TaxClue Income Tax Desk
Updated: 18 August 2026
Reading time: 5 min
Questions: 15 answered

Effective FY 2026-27
No new taxes or rates
Expert reviewed

Quick Answer

The Income-tax Act, 2025 replaces the Income-tax Act, 1961 and comes into force on 1 April 2026 — so it first governs FY 2026-27 (AY 2027-28). It is a simplification and recodification: no new taxes, the same slabs and the same deductions, with sections renumbered and the language cleaned up. Returns you file in July 2026 for FY 2025-26 are still assessed under the old 1961 Act.

The one thing to get right

Which Act Applies to Your Return?

The switch is by assessment year, not by the calendar date you file. Anything up to and including FY 2025-26 stays on the 1961 Act; FY 2026-27 onwards moves to the 2025 Act.

Financial Year	Assessment Year	Governing Act	ITR Due Date (individuals)
FY 2024-25	AY 2025-26	1961 Act	31 Jul 2025
FY 2025-26	AY 2026-27	1961 Act	31 Jul 2026
FY 2026-27	AY 2027-28	2025 Act	31 Jul 2027
FY 2027-28	AY 2028-29	2025 Act	31 Jul 2028

Existing assessments, refunds, appeals and demands raised under the 1961 Act continue under the transition/repeal-and-savings provisions of the 2025 Act.

TaxClue Insight

Nothing about your July 2026 filing changes because of the new Act. FY 2025-26 is filed under the 1961 Act, using the same new-regime default slabs (nil up to ₹12 lakh taxable via the Section 87A rebate, plus the ₹75,000 standard deduction for salaried taxpayers). The 2025 Act only affects income earned from 1 April 2026.

Structure, not substance

What Actually Changed in the 2025 Act

The recodification reorganises the law — it does not re-tax you. The change is in how the statute reads and is numbered, not in what you owe.

Same

What stayed the same

Tax slabs & rates (new regime is the default)
All deductions — 80C, 80D, 80G, 24(b), HRA, LTA
The ₹75,000 (new) / ₹50,000 (old) standard deduction
Section 87A rebate — nil tax up to ₹12 lakh (new regime)
Capital-gains rates from Finance Act 2024
TDS/TCS thresholds, advance tax & due dates

New

What is new

800+ sections consolidated & renumbered
Plain-language drafting with tables, fewer provisos
Obsolete / spent provisions removed
A single unified "tax year" concept
Cleaner chapter structure & cross-references
Same rules, far easier to navigate

No new tax and no rate change — the 2025 Act did not introduce a single new levy.
The new tax regime stays the default for individuals and HUFs (the old Section 115BAC framework), with the old regime available on election.
Established case law and interpretation from the 1961 Act era continue to guide the equivalent 2025-Act provisions.

Watch the section numbers, not the rules

From AY 2027-28, professionals and software will quote new section numbers. The provision may be identical in substance but carry a different number — always confirm you are citing the 2025-Act section for FY 2026-27 income and the 1961-Act section for earlier years.

Not sure which regime or slab applies to you this year?

Compare old vs new regime →

Old vs new

Key Section Mapping: 1961 Act → 2025 Act

Section numbers change but the substance is carried over. This is an indicative map of major provisions — verify the exact new-Act section on the official portal before citing it.

Provision	1961 Act	2025 Act position	Substantive change?
Exemptions (HRA, LTA, agriculture)	Section 10	Retained; reorganised into sub-chapters	No
Chapter VI-A deductions (80C, 80D, 80G)	Sec 80A–80U	Retained; regrouped	No
New tax regime (default slabs)	Section 115BAC	Default-regime chapter, simplified	No
Salary income	Sec 15–17	Salary chapter	No
Capital gains	Sec 45–55A	Retained; Finance Act 2024 rates	No
TDS / TCS framework	Sec 192–206CCA	TDS chapter, reorganised	No
Return of income	Section 139	Filing-provisions chapter	No
Presumptive taxation	Sec 44AD / 44ADA	Retained	No
Assessment & reassessment	Sec 143–153	Retained; reorganised	No

Indicative mapping only. Section numbers under the 2025 Act should be confirmed against the enacted text on incometax.gov.in.

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Reassurance

Your Deductions Are Retained

Every popular deduction and exemption survives the recodification — renumbered, but with the same limits and conditions. If you plan under the old regime, you keep the full Chapter VI-A toolkit.

Section 80C — investments up to ₹1.5 lakh
Section 80D — health insurance premium
Section 80G — donations
Section 24(b) — home loan interest
HRA & LTA exemptions
Standard deduction — ₹75,000 (new) / ₹50,000 (old)
Section 87A rebate — nil tax up to ₹12 lakh (new)
Section 80TTA / 80TTB — savings & senior interest

Most deductions belong to the old regime

Remember that 80C, 80D, HRA and most Chapter VI-A deductions are only usable if you opt for the old regime. The default new regime allows the ₹75,000 standard deduction and 80CCD(2) employer NPS, but not the broader 80C-style deductions — this logic is unchanged under the 2025 Act.

Background

From Direct Tax Code to the 2025 Act

The idea of replacing the 1961 Act was first floated as the Direct Tax Code (DTC) in 2009, with further drafts in 2010, 2013 and 2019 that were never enacted. The Income-tax Act, 2025 is the culmination of that 15-year effort — but it takes the conservative path: it keeps the tested provisions and simply rewrites them in cleaner language.

That is deliberate. Because the substance is preserved, taxpayers and practitioners do not have to relearn the law from scratch, and decades of jurisprudence continue to apply to the equivalent new-Act provisions.

✓Good news for you

No relearning — same rules, cleaner text
Existing case law still guides interpretation
Past filings, refunds and demands stay valid
Easier to read and cite going forward

!Things to watch

New section numbers from AY 2027-28
Software & templates must be updated
Cite the correct Act for the correct year
Confirm section references before quoting them

Have a specific question about how the new Act affects you?

Talk to a tax expert →

Sources

Act text & notifications: incometax.gov.in
e-filing portal: eportal.incometax.gov.in
Income-tax Act, 2025 — effective 1 April 2026 (AY 2027-28)
Slabs & rebate: Finance Act 2025 (new regime default, Section 87A rebate to ₹12 lakh)

Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.

Questions, answered

Short, direct answers to the 15 questions readers ask most on this topic.

The Income-tax Act, 2025 comes into force on 1 April 2026. It first applies to FY 2026-27 (Assessment Year 2027-28). For FY 2025-26 (AY 2026-27), the Income-tax Act, 1961 (as amended up to the Finance Act 2025) continues to apply. Returns filed in July 2026 for FY 2025-26 are still assessed under the 1961 Act framework.

The 1961 Act. Your July 2026 return is for FY 2025-26 (AY 2026-27), and that assessment year is still governed by the 1961 Act. The 2025 Act only governs income earned from 1 April 2026 onwards, i.e. FY 2026-27, which you will file in 2027.

It depends on the assessment year, which follows the year you earned the income — not the date you file. Income up to FY 2025-26 is assessed under the 1961 Act even if you file late; income from FY 2026-27 onwards is assessed under the 2025 Act.

Yes. All returns filed under the Income-tax Act, 1961 remain valid. The transition does not invalidate past filings, refunds, pending assessments, appeals or existing demands. Proceedings begun under the 1961 Act continue under the repeal-and-savings/transition provisions of the 2025 Act.

No. The 2025 Act is a recodification and simplification exercise. It introduces no new tax and changes no rate. Slabs, deductions, exemptions, TDS rules, advance tax and capital-gains provisions remain substantively the same as under the 1961 Act (with Finance Act 2025 amendments).

The changes are structural: the 800+ sections of the 1961 Act have been consolidated and renumbered, the drafting is simpler with tables and fewer provisos, obsolete provisions have been removed, and a single unified "tax year" concept is used. The tax you owe does not change.

No. The slabs are unchanged. Under the default new regime for AY 2026-27 income up to ₹4 lakh is nil, ₹4–8 lakh 5%, ₹8–12 lakh 10%, ₹12–16 lakh 15%, ₹16–20 lakh 20%, ₹20–24 lakh 25% and above ₹24 lakh 30%, with a Section 87A rebate making tax nil up to ₹12 lakh taxable income. These continue into the 2025 Act unless a future Finance Act revises them.

Yes. The new tax regime (the former Section 115BAC framework) remains the default for individuals and HUFs. The old regime, with Chapter VI-A deductions such as 80C and 80D, continues to be available if you opt for it.

Yes. All major deductions and exemptions — Section 80C (up to ₹1.5 lakh), 80D (health insurance), HRA, LTA, the standard deduction and home-loan interest under Section 24(b) — are retained in the 2025 Act. They are renumbered and reorganised, but limits and conditions are unchanged. Most of these are usable only under the old regime.

Unchanged. Salaried taxpayers and pensioners get a ₹75,000 standard deduction under the new regime and ₹50,000 under the old regime. Combined with the Section 87A rebate, a salaried person on the new regime pays nil tax up to about ₹12.75 lakh of salary.

Yes. The capital-gains rates introduced by the Finance Act 2024 are carried forward — for example 20% short-term and 12.5% long-term on listed equity (with the LTCG exemption on gains up to ₹1.25 lakh). No new capital-gains change was made as part of the 2025 recodification.

No. TDS/TCS rates and thresholds, advance-tax instalment dates and the return due dates are retained. The provisions are renumbered into a reorganised TDS chapter, but your compliance calendar and rates stay the same.

Nothing for now. You file FY 2025-26 as usual under the 1961 Act. From FY 2026-27, the only practical difference is that section numbers you or your advisor cite will follow the 2025 Act. Your tax outgo, deductions and regime choice logic are unchanged.

The enacted text, rules and notifications are published on the Income Tax Department portal at incometax.gov.in, and returns are filed at eportal.incometax.gov.in. Always confirm a specific section number against the official text before relying on it.

The 2025 Act is the culmination of the Direct Tax Code project first proposed in 2009 (with drafts in 2010, 2013 and 2019). Rather than a clean-slate rewrite, it retains the tested provisions of the 1961 Act and re-expresses them in simpler language, so established case law continues to apply.