From April 1, the Income Tax Act, 2025 replaces the law India has used since 1961. Rates and slabs stay the same. The language, structure and calendar terms change, starting with the idea of a single “tax year.”
For 65 years, Indian income tax ran on a law passed in 1961, amended so many times that even accountants struggled to follow it. From April 1, 2026, it runs on a new one: the Income Tax Act, 2025. If you are worried, there is no need. Rates and slabs have not changed. What has changed is how the rules are written, how they are organised and how the calendar is described.
Goodbye, assessment year
Under the old law, income earned in a financial year was the “previous year,” and it was assessed in the following “assessment year.” Income earned between April 2024 and March 2025 belonged to “previous year 2024-25” and “assessment year 2025-26,” which confused nearly every first-time taxpayer. The new law replaces both with a single tax year, the twelve months in which the income is earned. Forms and notices will use the new term from now on.
Shorter and plainer
The new Act has far fewer sections than the old one, with obsolete provisions removed and related rules grouped together. Many long explanations and provisos have been turned into tables. The aim is a law that ordinary taxpayers can actually read, which reduces disputes and the need to hire help for simple returns.
A tax law nobody can read is a tax law that only accountants can obey.
What stays the same
The new tax regime remains the default, under which income up to ₹12 lakh is effectively tax-free for most individuals after the rebate, and salaried people get a further standard deduction. TDS still applies to salaries, interest and other payments. For most students the practical change is vocabulary. When you file your first return, you will file it for a tax year, and you will never have to learn what an assessment year was.
Sources: Income Tax Act, 2025; Central Board of Direct Taxes notifications.
- The Income Tax Act, 2025 replaces the Income-tax Act, 1961 from April 1, 2026.
- Tax rates and slabs are unchanged. This is a rewrite, not a tax cut or hike.
- The confusing “previous year” and “assessment year” are replaced by a single “tax year”.
- The law is shorter, with far fewer sections and simpler language.
Read this far? You’d like the weekly email.
One email a week, covering exactly this kind of thing. No spam, no stock tips.
