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A plain-language guide to India's new tax law — what changed, why, and exactly when it affects your filing.
For over six decades, the Income-tax Act, 1961 governed how Indians paid tax. Thousands of amendments later, it had become a maze — sections with letters and decimals bolted on (think 80CCD(1B), 194-IA, 115BAC), and provisions scattered across the law that needed cross-referencing five sections just to understand one rule.
The Income-tax Act, 2025 replaces it entirely, effective 1 April 2026. It's a structural simplification, not a tax hike or a new set of rules — the rates, slabs, and deduction limits you already know are unchanged. What's changed is how the law is organised and numbered, aimed at making the Act easier to read and reference without altering what taxpayers actually owe.
Under the old Act, you dealt with two overlapping terms — the Previous Year (when you earned the income) and the Assessment Year (when you filed and got assessed on it). The new Act collapses both into a single concept: the Tax Year.
So instead of saying "I earned this in FY 2025-26 and will file it in AY 2026-27," under the new system it's simply "Tax Year 2026-27" — one year, one reference point. This removes a source of confusion that tripped up many first-time filers, who often mixed up which year's income was actually being assessed under the old dual-year system.
This is the part most people get wrong, so it's worth being precise about the timeline:
In practice, this means most taxpayers have a full filing cycle before the new numbering actually touches anything they do — there's no need to rush to relearn section numbers for a return that's due imminently.
Here's how the sections you're most likely to know by heart have been renumbered:
| What It Covers | Old Section (1961 Act) | New Section (2025 Act) |
|---|---|---|
| Standard tax-saving deductions (PPF, ELSS, life insurance, etc.) | 80C | 123 |
| Health insurance premium deduction | 80D | 126 |
| Additional NPS deduction | 80CCD(1B) | Consolidated under the 124-series |
| Home loan interest deduction | 24(b) | Reorganised under the house-property income chapter |
| Tax audit requirement | 44AB | 63 |
| New tax regime (default regime) | 115BAC | Renumbered, still the default |
| Exemptions (HRA, LTA, etc.) | Section 10 | Moved to Schedule II |
| TDS on salary | 192 | 392 |
| TDS on contractors, professionals, rent, etc. (194-series) | 194C, 194J, 194I, and others | Consolidated under Section 393, using payment codes instead of separate sections |
| TCS | Various sections | 394 |
The deduction limits themselves haven't moved — Section 80C becoming Section 123 doesn't change your ₹1.5 lakh limit. Only the reference number does. This is worth repeating because it's the single most common point of confusion: renumbering is not the same as a rule change.
One of the more significant structural changes is how TDS provisions were reorganised. Under the old Act, different types of payments — contractor payments, professional fees, rent, and dozens of other categories — each had their own separate section number (194C, 194J, 194I, and so on), making the TDS chapter one of the most fragmented parts of the old law. The new Act consolidates all of these under a single Section 393, distinguishing between payment types using codes rather than entirely separate sections. For someone who deducts TDS regularly — a business owner, a landlord receiving rent above the threshold, or an accountant — this means learning one section's structure with different codes, rather than memorizing a dozen separate section numbers scattered across the Act.
Your Form 16 for FY 2025-26 will still carry the old section numbers — no change there. A new form (expected to be called Form 130) is being introduced for future years once new-number filing begins. Employers and payroll software providers are expected to transition their systems ahead of the Tax Year 2026-27 filing cycle, so the shift should be largely invisible to most salaried taxpayers when it does happen — the same deductions will simply appear under new labels.
Honestly — nothing urgent. If you're filing for FY 2025-26 this July, use everything exactly as you always have. It's worth getting familiar with the new numbers ahead of time, since payroll systems, Form 16, and accounting software will start reflecting them over the next filing cycle. Bookmarking a reference like the table above, rather than trying to memorize every renumbered section at once, is a reasonable way to prepare without getting overwhelmed by a law that's still a year away from actually affecting your filing.
Key Takeaway: The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026 as a structural simplification — merging Previous Year and Assessment Year into a single Tax Year concept, and renumbering sections (80C to 123, 80D to 126, and others) without changing rates, slabs, or deduction limits. The FY 2025-26 return filed in July 2026 still uses the old numbers; the new numbering only applies from Tax Year 2026-27 onwards, giving taxpayers a full cycle to get familiar with the change before it actually affects their filing.
No — file exactly as you always have, using the old 1961 Act section numbers. The new numbering only applies starting from Tax Year 2026-27, filed in July 2027.
No — slab rates, deduction limits, and eligibility rules are unchanged. This is purely a reorganisation and renumbering of the existing law, not a substantive change to tax liability.
Any assessments, notices, or appeals relating to a period before 1 April 2026 continue to be governed by the old 1961 Act — the new law isn't applied retrospectively to past periods.
Not for FY 2025-26 — your Form 16 will still carry the old section numbers. A new form is expected for future years once new-number filing actually begins.
The old Act scattered TDS rules for different payment types (contractors, professionals, rent, and more) across many separate sections (194C, 194J, 194I, etc.), making the chapter fragmented. Consolidating them under Section 393 with distinguishing codes simplifies the structure without changing the underlying TDS rules.
There's no need to — for any filing related to FY 2025-26, the old numbers remain correct and expected. It's reasonable to start familiarizing yourself with the new numbers, but not necessary to switch to using them until Tax Year 2026-27 filings begin.
Disclaimer: This article is for general educational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Figures, rates, and rules mentioned may change over time — verify current details with an official source or a qualified professional before making financial decisions.