What changed under the Income-tax Act, 2025?

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. The 1961 Act had been amended by more than six decades of Finance Acts and had become long and hard to read. The new Act rewrites it in plainer language, drops provisions that no longer applied, groups related rules together and gives every provision a new number.

What it did not do is change how much tax most people pay. The slabs, the rebate and the standard deduction for tax year 2026-27 are the same as they were for FY 2025-26, and both the new and the old regime remain available. For a salaried person, the visible changes are mostly in names, section numbers and forms.

The change you will notice first is the vocabulary. Under the 1961 Act, income was earned in a "previous year" and assessed in the following "assessment year", so income earned from April 2026 to March 2027 would have belonged to previous year 2026-27 and assessment year 2027-28. Two labels for one year confused almost everyone.

The 2025 Act uses a single term. The twelve months from 1 April to 31 March in which you earn the income are the tax year. Income earned from 1 April 2026 is income of tax year 2026-27, and your return, your TDS certificates and your advance tax all refer to that one year.

Your tax under the new regime is worked out exactly as it was last year. The table uses the current engine for tax year 2026-27; the figures match FY 2025-26 because the rates did not change.

• The new regime remains the default, and you can still opt for the old regime with its deductions.
• The familiar deductions in the old regime continue, though under new section numbers. Many people will keep calling them by their old names, such as 80C and 80D, for years.
• Gratuity up to ₹20 lakh remains tax-free for private-sector employees, now under Section 19 read with Schedule II.
• One real change for tenants: from tax year 2026-27 the Income-tax Rules, 2026 extend the higher 50% HRA limit to Bengaluru, Hyderabad, Pune and Ahmedabad, alongside the four older metros.

Every provision has moved. Your salary TDS certificate, other TDS certificates, bank statements and tax notices will cite the new numbers. TDS, for example, is now set out in Section 392 for salary and in a table under Section 393 for most other payments, with the rates and thresholds carried over unchanged.

If a payee gives no PAN, TDS is generally deducted at 20% or the normal rate, whichever is higher. Advance tax is still due once your tax for the year, after TDS, is ₹10,000 or more.

Capital gains rates are carried over from the changes made in July 2024. Short-term gains on listed shares and equity funds are taxed at 20%, and long-term gains at 12.5% above ₹1,25,000 a year. Other long-term gains are taxed at 12.5% without indexation, with a 20% indexed option for land or buildings bought before 23 July 2024. The cost inflation index for 2026-27 has been notified at 384.

Interest on deposits continues to attract TDS at 10% above ₹50,000 a year per bank, or ₹1,00,000 for senior citizens. Forms 15G and 15H, or their replacements, still let you stop TDS when your income is below the taxable limit.

1. Use the term tax year 2026-27 for income earned from April 2026, in your records and when you speak to your employer, bank or tax adviser.
2. Declare your regime to your employer as usual. Nothing in the new Act changes how that choice works for a salaried person.
3. Expect your salary TDS certificate, interest certificates and the annual tax statement to cite new section numbers. Check the amounts, not just the labels.
4. Keep using old section names for clarity if you find them easier, but quote the new numbers in any reply to a notice.
5. Recheck advance tax if you have interest, rent, capital gains or freelance income; the instalment dates have not moved.