When does the Income Tax Act 2025 take effect?

The Income Tax Act 2025 comes into effect from 1 April 2026, replacing the Income Tax Act 1961. It applies from the financial year 2026-27 onwards; returns for AY 2026-27 (income up to 31 March 2026) are still governed by the 1961 Act.

What is the new 'Tax Year' concept?

The new Act replaces the dual terms 'Previous Year' and 'Assessment Year' with a single concept, the 'Tax Year', to simplify the law and reduce confusion about which year you are filing for.

Do tax rates change under the new Act?

The new Act is primarily a simplification and restructuring of the law rather than a rate overhaul. Slab rates are set in the annual Finance Acts, and Budget 2026 kept the new-regime slabs unchanged for FY 2026-27.

What should businesses do to prepare?

Keep records and accounting up to date, track income, TDS and advance tax under the new framework from April 2026, and consult an advisor to map old sections to the new Act so compliance stays smooth during the transition.

Tax & ITR

Income Tax Act 2025: What Changes for Delhi Taxpayers from April 2026

By CA Kunal Mehta, FCAUpdated May 20266 min read

Income Tax Act 2025 — new tax law replacing the 1961 Act from 1 April 2026 for Delhi taxpayers

In short

India has a new tax law. The Income Tax Act 2025 takes effect from 1 April 2026, replacing the decades-old 1961 Act. It's mainly a simplification and restructuring — clearer language, fewer cross-references, and a single "Tax Year" replacing the confusing "Previous Year / Assessment Year" pair. It applies from FY 2026-27; your AY 2026-27 return (income up to 31 March 2026) still follows the old 1961 rules. Rates are set by the annual Budget, which kept new-regime slabs unchanged.

For the first time in over six decades, India has rewritten its core income-tax law. Here's what Delhi taxpayers and businesses actually need to know — without the legalese.

What is the Income Tax Act 2025?

It's a comprehensive replacement for the Income Tax Act 1961, designed to make the law simpler and easier to read — shorter sections, plainer language, and fewer tangled cross-references. The substance of how income is taxed largely carries over; the goal is clarity, not a rate revolution.

When does it apply?

The new Act is effective from 1 April 2026
It applies from the financial year 2026-27 onwards
Your return for AY 2026-27 (income earned up to 31 March 2026) is still governed by the 1961 Act

So this filing season runs on the old rules; the new Act shapes how you'll think about tax from next year.

The biggest practical change: "Tax Year"

The old law used two overlapping terms — "Previous Year" (when you earn) and "Assessment Year" (when you're assessed) — which confused countless taxpayers. The new Act replaces them with a single "Tax Year", aligning the language with how people actually think about their income.

What stays the same

Tax rates and slabs are still set by the annual Finance Act; Budget 2026 kept the new-regime slabs unchanged for FY 2026-27 (see new vs old regime)
Core concepts — heads of income, deductions, TDS, advance tax — broadly continue
Late-filing fees and similar provisions are carried into the new Act

What businesses should do

Keep records current

Maintain clean books and track income, TDS and advance tax under the new framework from April 2026.

Map old to new

Familiar sections get renumbered; an advisor can map your usual provisions to the new Act.

Review processes

Update accounting software settings, templates and compliance checklists for the new terminology and references.

The bottom line

For most Delhi taxpayers, the Income Tax Act 2025 means a clearer law rather than a bigger bill. The transition is mostly about terminology and references — but getting those right keeps compliance smooth. Our Saket team guides individuals and businesses through it as part of ITR & tax advisory.

General information, not tax advice. Provisions are subject to rules and notifications under the new Act; confirm specifics for your situation.

How Startup Advisory Can Help

Startup Advisory is a CA-led firm in Saket, New Delhi that helps individuals and businesses across Delhi NCR make sense of the new Income-tax Act, 2025 and apply it correctly. Rules have changed — we make sure your filing reflects them and that you do not pay more than you owe:

ITR filing and tax advisory aligned with the latest Act, slabs and deduction rules.
A review of how the changes affect your specific income and entity type.
Ongoing bookkeeping so your records already match the new requirements.
A named CA who tracks every amendment so you do not have to.

Call 9311972982 or book a free consultation to file confidently under the new law.

Frequently Asked Questions

From 1 April 2026, replacing the 1961 Act, applying from FY 2026-27. Returns for AY 2026-27 (income up to 31 March 2026) still follow the 1961 Act.

The new Act replaces 'Previous Year' and 'Assessment Year' with a single 'Tax Year' to simplify the law and reduce confusion about which year you're filing for.

It's mainly a simplification, not a rate overhaul. Rates are set in the annual Finance Acts; Budget 2026 kept the new-regime slabs unchanged for FY 2026-27.

Keep records current, track income, TDS and advance tax under the new framework from April 2026, and have an advisor map old sections to the new Act for a smooth transition.

Largely carried over, though renumbered. The new Act restructures provisions rather than abolishing common deductions, and the new regime remains the default. The substance of how deductions work mostly continues, so confirm the new section references when you file.

Yes. The Act renumbers and consolidates sections to make the law shorter and clearer, so familiar provisions sit under new numbers. The underlying treatment is broadly the same, but references in documents and software will need updating.

The choice between regimes continues, and the actual slab rates are fixed each year by the Finance Act, not the new Act itself. Budget 2026 left the new-regime slabs unchanged for FY 2026-27, so your regime decision works as before.

TDS and TCS continue under the new Act, with the provisions consolidated and presented more simply, often in tabular form. The obligations to deduct, deposit and report broadly carry over, so your compliance routine stays similar.

Under the old Income Tax Act 1961. Your AY 2026-27 return covers income earned up to 31 March 2026, which belongs to the old law. The new Act first applies to income of FY 2026-27, with those returns filed in 2027.

The new Act does not launch a fresh capital-gains overhaul; it carries forward the structure already in force, including the revised rates that applied after 23 July 2024. As always, the annual Budget can adjust rates separately.

For businesses it is mainly a restructuring exercise. Corporate tax rates are still set by the Finance Act and were not overhauled, while definitions, the compliance framework and reporting are reorganised under the new Act. Companies should refresh their section references and software settings.

ITR forms and the e-filing utilities will be aligned to the new Act for FY 2026-27 returns, which are filed in 2027. For the current AY 2026-27 filing, the existing forms under the 1961 Act apply.

For your AY 2026-27 return, nothing changes – you file under the old law as usual. Going forward, simply be aware of the new Tax Year terminology and updated section references, and your advisor will handle the mapping.

About the author: CA Kunal Mehta, FCA

Co-Founder & Chartered Accountant, Startup Advisory — Saket, New Delhi

CA Kunal Mehta is a Fellow Chartered Accountant (FCA) and a co-founder of Startup Advisory who focuses on the finance and growth side of a startup's journey — fundraising readiness, cash-flow planning, corporate tax and GST for founders across Delhi NCR.

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