The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. It is a rewrite, not a tax hike: slabs, the ₹75,000 standard deduction and zero tax up to ₹12 lakh of taxable income under the new regime stay the same. What changes is the language. "Previous year" and "assessment year" become one "tax year", sections are renumbered (80C is now Section 123), and Form 16 becomes Form 130. Your FY 2025-26 return is still filed under the old Act.
Key Takeaways
- The new Act applies to income earned from 1 April 2026 (tax year 2026-27). Income up to 31 March 2026 stays under the 1961 Act.
- Tax rates did not change because of the new Act; rates are still set each year by the Finance Act.
- Familiar section numbers change: 80C becomes Section 123, salary TDS moves from 192 to 392, and other TDS sections merge into 393.
- Form 16 becomes Form 130 and Form 26AS becomes Form 168, starting with tax year 2026-27.
- Salaried taxpayers can still choose the old or new regime every year.
When does the new Income Tax Act apply?
The new law took about six months to pass and came into force at the start of the 2026-27 financial year. The dates that matter:
| Date | What happened |
|---|---|
| 13 Feb 2025 | Income-tax Bill, 2025 introduced in Lok Sabha and sent to a Select Committee |
| Aug 2025 | Revised Income-tax (No. 2) Bill, 2025 passed by both Houses |
| 21 Aug 2025 | President's assent; it became the Income-tax Act, 2025 |
| 1 Apr 2026 | New Act and the Income-tax Rules, 2026 in force; tax year 2026-27 begins |
| Jun–Jul 2026 | Returns for FY 2025-26 filed as usual, under the 1961 Act |
| Jun 2027 | First Form 130 (the new Form 16) issued for tax year 2026-27 |
In practice, 2026 is a year with two laws. Everything about money you earned up to 31 March 2026, including the return you file in July 2026, any notice about it and any refund, follows the 1961 Act. Everything you earn from April 2026 follows the 2025 Act.
What is a "tax year"?
Under the old law you earned income in the "previous year" and it was assessed in the following "assessment year". Salary earned between April 2025 and March 2026 was FY 2025-26 income, reported for AY 2026-27. Two labels for one year confused many first-time filers.
The 2025 Act uses one label: the tax year, which is simply the financial year from 1 April to 31 March. Salary you earn between April 2026 and March 2027 is tax year 2026-27 income, and the return you file for it in 2027 is the return for tax year 2026-27. If you start a new business mid-year, its first tax year runs from the date it starts to the following 31 March.
Did income tax rates change?
No. The new Act rewrote the law's structure, not the rates. Rates come from the annual Finance Act, and Budget 2026 kept the slabs introduced in Budget 2025. For tax year 2026-27 the new regime, which is the default, looks like this:
| Taxable income | Rate (new regime) |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4–8 lakh | 5% |
| ₹8–12 lakh | 10% |
| ₹12–16 lakh | 15% |
| ₹16–20 lakh | 20% |
| ₹20–24 lakh | 25% |
| Above ₹24 lakh | 30% |
A rebate makes tax nil when taxable income is up to ₹12 lakh, and salaried people also get a ₹75,000 standard deduction, so a salary of up to ₹12.75 lakh pays no tax under the new regime. The old regime keeps its ₹2.5 lakh basic exemption, its 5%, 20% and 30% slabs, the ₹50,000 standard deduction and deductions such as 80C, 80D and home loan interest. Health and education cess of 4% applies on top in both. See our new vs old tax regime guide for worked examples at different salaries.
What happened to Section 80C and other familiar sections?
The deductions still exist, but almost every section has a new number. The 1961 Act had grown to 819 sections across 47 chapters; the 2025 Act has 536 sections in 23 chapters, with many lists moved into 16 schedules. The numbers you are most likely to meet:
| What it is | Under the 1961 Act | Under the 2025 Act |
|---|---|---|
| ₹1.5 lakh deduction (EPF, PPF, ELSS, life cover, home loan principal) | Section 80C | Section 123, with the eligible items in Schedule XV |
| TDS on salary | Section 192 | Section 392 |
| TDS on interest, rent, fees and other payments | Sections 193 to 196D | Section 393, with a payment code for each type |
| Salary TDS certificate | Form 16 | Form 130 |
| Other TDS certificate | Form 16A | Form 131 |
| Annual tax statement | Form 26AS | Form 168 |
| No-TDS declaration on interest | Forms 15G and 15H | Form 121 |
Expect both sets of numbers for a while. Banks, employers and older articles will keep writing "80C", and the substance is the same: the ₹1.5 lakh limit, the eligible investments and the rule that these deductions are available only in the old regime. When a form or letter quotes a section, check which Act it refers to.
What changes for salaried employees?
Very little in your monthly pay, and a little in the paperwork:
- Investment declaration: your employer's declaration for tax year 2026-27 will cite the new sections. Submit proofs (ELSS, PPF, insurance, rent receipts) the same way as before.
- Regime choice: you can still pick the old or new regime each year, telling your employer at the start and confirming in your return. Taxpayers with business income can switch only in limited cases, as before.
- Certificates: you will receive Form 16 in June 2026 for FY 2025-26 and Form 130 in June 2027 for tax year 2026-27.
- Your 2026 return: nothing new to learn. FY 2025-26 income is filed in 2026 under the 1961 Act, with the usual ITR forms.
If you invest for tax saving under the old regime, the logic does not change either. Spreading ELSS or PPF contributions through the year with a monthly SIP avoids a rushed lump sum in March. Compare the two most common options in ELSS vs PPF, and see how fund gains are taxed in our mutual fund taxation guide.
A checklist for tax year 2026-27
- File your FY 2025-26 return by the July 2026 due date under the old Act
- Choose your regime for 2026-27 using your actual deductions, not habit
- If you stay in the old regime, start ELSS or PPF contributions early in the year
- Keep 80D health insurance and rent receipts ready; the deductions continue in the old regime
- Expect Form 130, not Form 16, for tax year 2026-27, and check it against Form 168
- Run both regimes on our tax planning calculator before you declare
Frequently Asked Questions
When does the new Income Tax Act 2025 come into effect?
From 1 April 2026. It applies to income earned in tax year 2026-27 and later. Income earned up to 31 March 2026 is still governed by the Income-tax Act, 1961.
Does the new Income Tax Act change my tax amount?
Not by itself. The Act changes structure and language; rates are set by the Finance Act, and Budget 2026 kept the slabs from Budget 2025. Your tax changes only if your income, deductions or chosen regime change.
Under which Act do I file my return for FY 2025-26?
Under the Income-tax Act, 1961. Returns, notices and refunds for income earned up to 31 March 2026 continue under the old law, even though they are handled after April 2026.
Is Section 80C removed in the new Income Tax Act?
No. The deduction continues as Section 123, with the eligible investments listed in Schedule XV and the same ₹1.5 lakh limit. As before, it is available only if you choose the old regime.
Will I still get Form 16?
Yes for FY 2025-26, issued by June 2026. From tax year 2026-27 the salary TDS certificate is Form 130, so the first one arrives around June 2027.
Can I still choose the old tax regime?
Yes. The new regime remains the default, but salaried taxpayers can choose the old regime each year if their deductions make it cheaper.
Need to plan your tax savings under the new Act?
Hatlet Ventures helps salaried families in Tamil Nadu compare both regimes on their real numbers and set up ELSS, PPF and insurance only where they save tax.
Not Sure Which Regime Suits You?
Share your salary and deductions and Sri Balaji will compare both regimes for tax year 2026-27 on a free call.
Disclaimer: This article is for education only and is not investment, tax or legal advice. Figures and rules are stated as understood on the date shown and can change. Return figures are illustrative or historical, not guaranteed; past performance does not guarantee future results. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Insurance is the subject matter of solicitation. Hatlet Ventures is an AMFI-registered mutual fund distributor (ARN-345155), not a SEBI-registered investment adviser.
Sri Balaji is the founder of Hatlet Ventures in Tiruppur, Tamil Nadu. He is a NISM Certified Research Analyst, AMFI Registered Mutual Fund Distributor (ARN-345155), IRDAI Registered Insurance Agent (1911251001) and APMI Registered PMS Distributor (APRN09158). With 8+ years of experience, he has guided 500+ families across Tamil Nadu in SIP, mutual funds, insurance planning, and portfolio management. All content on this blog is reviewed for accuracy and updated regularly.