The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the 1961 Act after 65 years. It has 536 sections against more than 800 in the old law. For most businesses, tax rates have not changed. What has changed is the vocabulary, the section numbers and the forms. Those changes show up in your TDS returns, payroll, vendor paperwork and next year's tax audit.
"Tax year" replaces previous year and assessment year
The old law taxed the income of the "previous year" in the following "assessment year". The new Act uses one term: the tax year, which is the same as the financial year. Income earned from 1 April 2026 to 31 March 2027 is income of tax year 2026-27. It is still assessed after the year ends, as before.
Which law applies to what
- Income of FY 2025-26 and earlier stays under the 1961 Act. That includes the returns being filed now for AY 2026-27, even though they are filed after 1 April 2026.
- Pending assessments, notices and appeals for earlier years continue under the 1961 Act. So do new proceedings opened for those years.
- Losses brought forward from the old Act can be carried forward and set off under the new Act.
- TDS follows the earlier of credit or payment. If that happened by 31 March 2026, the old Act applies.
Section numbers you will see most
| Topic | 1961 Act | 2025 Act |
|---|---|---|
| TDS on salary | Section 192 | Section 392 |
| TDS on other payments (contractors, professionals, rent, commission) | Sections 194 to 195 | Section 393 |
| TCS | Section 206C | Section 394 |
| Tax audit | Section 44AB | Section 63 |
Forms that have new names
- Tax audit report: Forms 3CA, 3CB and 3CD are combined into Form 26. It will first be used for audits of tax year 2026-27, in 2027.
- TDS returns: 24Q is now Form 138, 26Q is Form 140, 27Q is Form 144 and 27EQ is Form 143. Our note on the Q2 TDS return has the full list and due dates.
- Certificates: Form 16 is Form 130 and Form 16A is Form 131.
- Declarations: Form 12BB is Form 124, and Forms 15G and 15H are combined into Form 121.
What stays the same
The new regime slabs are unchanged, and so is the Section 87A rebate. Resident individuals with taxable income up to ₹12 lakh still pay no tax under the new regime. The ITR due dates and the familiar deduction limits carry over. The new Act is mainly a rewrite and renumbering of the existing law, not a new tax policy. Individual rules have been tightened or relaxed in places, though, so check before relying on an old interpretation.
What a business should update now
- Accounting and TDS software — the new section codes and return formats. This is the most common source of errors this year.
- Payroll — employee declarations on Form 124 and salary TDS under section 392, filed in Form 138.
- Vendor records — Form 121 declarations, lower-deduction certificates and TDS mappings for each vendor type.
- Contracts, invoices and internal SOPs that quote old section numbers. They still work, but update them as they come up for renewal.
- Tax audit planning — if you are covered by section 63, plan the year's books with Form 26 in mind rather than waiting until September 2027.
How Vitt-Marg helps
We are working with clients through the switch: mapping TDS sections and vendor codes, updating payroll declarations, and filing returns on the new forms. We also keep earlier years' assessments and notices on the 1961 Act, where they belong. If you are not sure which Act applies to a particular payment or notice, send it to us and we will tell you. For individual returns, see our ITR filing page.
General information, current as of October 2026, not advice for a specific case. GST and income-tax rules change often — check with us before acting on it.