Income-tax Act, 2025: what changed on 1 April 2026 and what stayed the same

On 1 April 2026, India switched to a new income tax law. The Income-tax Act, 2025 replaced the Income-tax Act, 1961, which had been in force for more than six decades. Parliament passed the new Act in August 2025 and it received Presidential assent on 21 August 2025.

If you are worried that your tax will change overnight, the short answer is: not because of the new Act itself. The government’s aim was to make the law shorter and easier to read, not to change tax policy. Budget 2026, presented on 1 February 2026, also left income tax slabs and rates unchanged.

The biggest visible change: one “Tax Year”

Under the old law, the same income was described with two different years. The year you earned it was the “previous year”. The following year, when it was assessed, was the “assessment year”. Income earned from April 2025 to March 2026 was “previous year 2025-26” and “assessment year 2026-27”. Many people found this confusing.

The new Act uses one term: Tax Year. The Tax Year is the financial year in which you earn the income. Income earned from 1 April 2026 to 31 March 2027 belongs to Tax Year 2026-27, and you file your return for Tax Year 2026-27.

What stayed the same

• Tax slabs and rates. The slab rates introduced by the Finance Act, 2025 continue for Tax Year 2026-27.
• Both tax regimes. The new regime remains the default, and the old regime with its deductions is still available to those who choose it.
• The basic system. PAN, TDS, advance tax, the Annual Information Statement, online return filing, faceless assessment and appeals all continue in substance.
• Earlier years. Tax matters for years before 1 April 2026, including pending assessments, continue under transition rules.

What is different

• Section numbers. Provisions have been reorganised and renumbered. For example, the presumptive taxation schemes for small businesses, professionals and goods carriage operators are now together in Section 58.
• Shorter law. The new Act has 536 sections, compared with 819 in the 1961 Act, and uses more tables and plainer drafting.
• Forms and portal labels. Over time, forms and the e-filing portal move from “Assessment Year” to “Tax Year” for years governed by the new Act.

A worked example: Priya, a salaried designer

Priya earns a salary in Bengaluru. Here is how the change affects her over two years.

1. Income from April 2025 to March 2026. This is FY 2025-26. In mid-2026 she files her return for Assessment Year 2026-27, under the 1961 Act, using the forms prescribed under that Act.
2. Income from April 2026 to March 2027. This is Tax Year 2026-27 under the 2025 Act. Her employer deducts TDS during the year as usual. She files her return for Tax Year 2026-27 after the year ends.

Her tax for 2026-27 is worked out with the same slab rates as the year before, because Budget 2026 did not change them. What looks different is the label on her documents.

What this means for freelancers

If you earn professional income, your advance tax for Tax Year 2026-27, starting with the instalment due in June 2026, follows the new Act. If you use the presumptive scheme for professionals, look for Section 58 rather than Section 44ADA. Our guide to presumptive taxation under Section 58 explains the scheme in detail.

How we handle the change on FinanceOpen

Every guide on FinanceOpen states which law and which year it covers. We do not mix the 1961 Act and the 2025 Act on the same page, because mixing section numbers and terms is a common source of mistakes. Our income tax calculator lets you choose the year, and tells you which law applies.