On 1 April 2026 the Income-tax Act, 2025 came into force and the Income-tax Act, 1961 was repealed. The Press Information Bureau’s release that day describes the new Act as a comprehensive effort to simplify and modernise the framework, replacing a six-decade-old law, and it says something that deserves to be quoted whenever the change is discussed: the rewrite was done “without altering the underlying tax policy”.
That single clause sets the boundaries of this story. This was a replacement of the statute book, not a budget. The rates you pay, the rebates you claim and the deductions available are still set by the Finance Act for the year, and the new Act’s job is to state the machinery in clearer language.
The dates that matter
The Bill was passed by Parliament on 12 August 2025 and received presidential assent on 21 August 2025. The Income-tax Rules, 2026, which operationalise the Act, were notified by the Central Board of Direct Taxes on 20 March 2026, and the corresponding forms were notified with them. The Act itself commenced on 1 April 2026.
Those four dates explain a question that arrives every filing season: which law applies to which year. The Act governs income of tax year 2026-27 onwards. Returns for financial year 2025-26 — the year that ended on 31 March 2026 — are still filed under the 1961 Act, under the transitional provisions, even though they are filed after the new Act has begun.
What actually changed
The most visible change is terminology. The Income Tax Department’s own guidance states that “tax year” replaces “previous year”, and that the concept of “assessment year” is discontinued. In practice this removes a layer of vocabulary that has confused first-time filers for decades: instead of asking which previous year belongs to which assessment year, a filer states the year in which the income was earned, and the return follows.
The structure changed as well — the Act is shorter and uses plainer language, and the Rules and forms were rewritten to match. The department has also said that proceedings and actions taken under the old Act for earlier years continue under the transitional provisions, so the repeal does not reopen completed assessments or invalidate returns already filed.
What did not change
The tax policy. The new Act reproduces the substantive law rather than redesigning it, and the PIB release is explicit that the simplification was achieved without altering the policy underneath. The slab rates for a given year, the rebate under the new regime, the standard deduction for salaried filers, the treatment of house rent allowance and the rest are decided by that year’s Finance Act, exactly as before.
That is why a headline promising that 1 April 2026 changed what you owe should be read with care. If the Finance Act for the year did not change a rate, the new Act did not either; it simply states the same rule in a different section of a different statute. The practical check is always the same: which year’s Finance Act applies, and what does the form for that year ask for.
What a salaried filer should do
For the return being filed now — financial year 2025-26 — use the 1961 Act forms and instructions, because that is the law for that year. For the year that began on 1 April 2026, the new Act, the 2026 Rules and the new forms apply. Mixing the two is the most likely error of this transition: an old form for a new year, or a new form for an old year, will produce either a rejected upload or a wrong computation.
The deductions themselves are unchanged in substance, which means the arithmetic is unchanged too. The HRA calculator still compares the three exemption tests on the rent you actually pay, and the salary calculator still builds a pay figure from the components you enter. What changed is the name of the year on the page, not the sum at the bottom.
The honest summary
A new statute is a real event in tax administration, and the transition will produce genuine friction — new forms, new vocabulary, a department and a profession learning a new map at the same time. It is not a tax cut, and it is not a tax increase. It is the same policy in a shorter book, and the filer’s job is to make sure the book matches the year.
Sources
- Press Information Bureau — Income-tax Act, 2025 comes into force from today (1 April 2026)
- Income Tax Department — Objective and scope of the New Act (1961 Act repealed on 01.04.2026; tax year replaces previous year)
- PRS Legislative Research — Union Budget 2026-27 Analysis (no change in income tax slabs)
- The Indian Express — Income Tax Rule Changes from April 1 (returns for FY 2025-26 remain under the 1961 Act)
