Effective April 1, 2026, the Income-tax Act, 2025 (ITA 2025) replaces the Income-tax Act, 1961 (ITA 1961), marking a transition toward a simpler, transparent, and taxpayer-friendly regime. This transition is governed by a robust “repeal and savings” framework under Section 536, which ensures that established rights, pending proceedings, and past liabilities remain protected while moving to a modernized code.
1. The General Philosophy of Transition
The primary objective of the 2025 Act is to simplify statutory language and improve structural clarity without imposing new taxes or increasing the tax burden.
- Structural Simplification: The Act reduces the number of sections by 35% (from 819 to 536) and forms by 52% (from 399 to 190).
- The “Tax Year” Concept: The confusing dual-year terminology of “Previous Year” and “Assessment Year” is discontinued. It is replaced by a “Tax Year” (TY), which is a 12-month period aligned with the financial year.
- Parallel Operation: Income earned in FY 2025-26 will be filed as AY 2026-27 under the 1961 Act. Income earned from April 1, 2026, onwards will be filed as TY 2026-27 under the 2025 Act.
- Continuity: Administrative frameworks like PAN, TAN, and faceless proceedings continue uninterrupted.
2. Tax Payments, Collections, and Refunds
The fundamental obligation to pay tax via TDS/TCS, advance tax, and self-assessment tax remains identical.
- Advance Tax: The threshold remains Rs. 10,000. For TY 2026-27, the first instalment is due June 15, 2026, under the new Act.
- Arrears & Refunds: Outstanding liabilities and refund claims from the 1961 Act remain recoverable and valid under the machinery of the new Act.
- MAT/AMT Credits: Unutilised credits from the old Act can be carried forward for 15 years and utilized against liabilities in the new Act.
3. Furnishing of Income Tax Returns (ITR)
The fundamental structure for mandatory filing and due dates remains the same.
- No Double Filing: Taxpayers file for FY 2025-26 in July 2026 (old Act) and for FY 2026-27 in July 2027 (new Act).
- Belated/Revised Returns: For AY 2026-27, these are governed by the old Act. For TY 2026-27, a revised return must be filed within 12 months of the end of the tax year.
- Updated Returns (ITR-U): Can be filed for up to 48 months from the end of the financial year succeeding the relevant tax year.
4. Detailed Expansion: Issues Concerning NRIs
The new Act preserves the core residency tests and special tax incentives for Non-Resident Indians.
- Residency Tests: An individual is a resident if they stay for 182 days or more. The special 182-day relaxation for citizens leaving for employment abroad is retained.
- Deemed Residency: Section 6(7) retains the rule for Indian citizens with income >Rs. 15 lakh who are not taxed elsewhere.
- Concessional Regime: The special regime for investment income (20%) and LTCG (10%/12.5%) on foreign exchange assets is reproduced in Sections 213 to 217.
- Continuity of Benefits: NRIs who become residents can continue concessional tax on certain assets by filing a declaration.
- NRE Exemption: Interest on Non-Resident (External) accounts remains exempt under Schedule IV.
5. Reassessment and Appeals
- Reassessment Procedure: For any tax year beginning before April 1, 2026, the 1961 Act governs, even if the notice is issued post-transition. For new years, the AO must have “information suggesting escaped income” and issue a show-cause notice under Section 281.
- Appeals: Pending appeals on April 1, 2026, will be decided under the 1961 Act. The hierarchy of JCIT(A)/CIT(A) to the Supreme Court remains unchanged.
- Revision: The 2025 Act introduces a 60-day minimum residual period for passing revision orders.
6. Losses and Deductions
- Carry Forward: Losses determined under the old Act (e.g., 8-year limit for business losses) carry forward seamlessly into the new Act.
- Profit-Linked Deductions: Undertakings eligible for deductions like 80-IA or 80-IBA can continue claiming them for the remaining duration under the 2025 Act.
- Condition Breach: If a deduction condition from the old Act is breached after April 1, 2026, the benefit is reversed and taxed in the year of violation under the new Act.
7. Miscellaneous & Search
- New Tax Regime: Remains the default regime under Section 202.
- Search Operations: If a search was initiated before April 1, 2026, all connected proceedings (assessment, penalty, appeal) follow the 1961 Act.
- GAAR: General Anti-Avoidance Rules are retained without changes to thresholds or safeguards.
Master FAQ Mapping: Old vs. New Forms
| Purpose | Form under Old Act (1961) | Form under New Act (2025) |
| PAN Application (Indian Individual) | Form 49A | Form 93 |
| PAN Application (Foreign Individual) | Form 49AA | Form 95 |
| TAN Application (Others) | Form 49B | Form 135 |
| Declaration where PAN not available | Form 60 | Form 97 |
| Lower Withholding Certificate | Form 13 | Form 128 |
| Unified Self-Declaration (No TDS) | Forms 15G / 15H | Form 121 |
| Salary Arrears/Advance Relief | Form 10E | Form 39 |
| Foreign Remittance Information | Form 15CA | Form 145 |
| Foreign Remittance CA Certificate | Form 15CB | Form 146 |
| Unified Tax Audit Report | Forms 3CA / 3CB / 3CD | Form 26 |
| TDS Return (Salary) | Form 24Q | Form 138 |
| TDS Return (Non-Salary) | Form 26Q | Form 140 |
| TDS Return (Non-Resident) | Form 27Q | Form 144 |
| TCS Return | Form 27EQ | Form 143 |
| Challan-cum-TDS Statement | 26QB/QC/QD/QE | Form 141 |
| Annual Information Statement | AIS | Form 168 |
Note: This article summarizes the 262+ FAQ guidance provided by the CBDT. In the event of any conflict, the statutory provisions of the Income-tax Act, 2025 shall prevail.