The Income-tax Act, 2025 came into force on 1 April 2026. It replaces the Income-tax Act, 1961 for income of the years that begin on or after that date. The change that most people notice first is the vocabulary: the Act speaks of a “tax year”, and the separate ideas of a “previous year” and an “assessment year” are gone.
Two Acts, side by side
The change is not a clean switch on one date. Which Act applies depends on the year the income belongs to.
- Income of FY 2025-26 (assessment year 2026-27) remains under the 1961 Act. The return is filed on the old ITR forms, with the assessment year selected on the portal. A revised return, a belated return, an updated return, a notice about a defective return, and a scrutiny for that year are all governed by the 1961 Act, even if they happen after 1 April 2026.
- Income of FY 2026-27 (tax year 2026-27) falls under the 2025 Act. Its return is filed after the year ends, on the forms notified under the Income-tax Rules, 2026.
The department’s own guidance says these are two separate compliance obligations, and filing one does not discharge the other. The e-filing portal supports both during the transition.
What stays the same
The department states that the basic structure of filing is unchanged: who must file, the categories of persons obliged to file, and the idea of a due date. The 2025 Act puts the original, belated, revised, and updated return into one section, section 263. Under it a belated return can be filed within nine months of the end of the tax year, and an updated return within 48 months from the end of the financial year following the tax year, with additional tax. Late-filing fees are Rs 1,000 where total income does not exceed Rs 5 lakh and Rs 5,000 otherwise, the same amounts as before.
Losses are carried forward across the change. A loss for assessment year 2026-27 can be set off in tax year 2026-27 and later years under the conditions that the new Act prescribes, and the carry-forward period does not restart. The condition that a return of loss be filed by the original due date continues for business and capital-gains losses.
What changes in daily work
- Section numbers. Many provisions have new numbers. Tax audit, section 44AB of the 1961 Act, is section 63 of the 2025 Act, and the return provision is section 263. Notes, workings, and replies should cite the section of the Act that governs the year they relate to.
- Forms. Tax audit reporting moves from Forms 3CA/3CB/3CD to Form No. 26 from tax year 2026-27. See the note on section 63 and Form 26. Other forms are renumbered under the 2026 Rules.
- Challans and statements. Payments must show the right period: assessment year 2026-27 for FY 2025-26, and tax year 2026-27 for FY 2026-27. TDS and TCS statements and Form 26AS should be reconciled separately for each year.
Records to keep ready
- A dividing line in the books at 31 March 2026: income, expenses, TDS, and advance tax on each side.
- A list of every challan paid since 1 April 2026, with the year it was paid against.
- A mapping from the old section to the new section for each provision your computation uses.
- Loss schedules from the last return filed under the 1961 Act, with the year each loss arose.