Income-tax Act 2025: Which Law Applies from 1 April 2026?
1. Current position
The Income-tax Act, 2025 came into force on 1 April 2026. The Income-tax Department’s transition guidance explains that the 1961 Act continues to govern earlier periods and proceedings as preserved by the new framework. A return filed in 2026 can therefore still relate to a year governed by the 1961 Act. Taxpayers must use the correct Act, form, terminology and portal workflow for the relevant tax year.
2. How it works in practice
The new Act simplifies structure and terminology, but substantive treatment still requires year-specific analysis. Tax teams should map deductions, withholding, forms, notices, appeals and pending proceedings. Old judicial precedents may remain relevant where language and principle continue, but the applicability must be tested rather than assumed.
A reliable decision separates the legal rule, the commercial contract and the actual cash flow. A regulatory permission does not guarantee suitability, and a product label does not override the substance of the transaction.
3. Key rules and measurement boundaries
| Item | Position | How to read it |
|---|---|---|
| Effective date | 1 April 2026 | New Act applies prospectively as provided |
| Transition risk | Filing date differs from governing tax year | A 2026 filing may use the earlier Act |
| Practical control | Use official form-mapping guidance | Do not convert section references mechanically |
4. Practical example
A salaried taxpayer files the return for FY 2025–26 in July 2026. The filing date is after 1 April 2026, but the income period began before that date. The portal’s official form and transition guidance—not the calendar date of filing alone—determines the applicable framework. A business with a notice for an older year may simultaneously handle a current-year transaction under the new Act.
5. Action checklist
- Identify the relevant tax year before citing a section or form.
- Use the Income-tax portal’s official mapping guide for forms and processes.
- Maintain a dual-law checklist for legacy assessments and new-year transactions.
- Update contracts, payroll, TDS/TCS and tax-provision templates carefully.
- Do not treat a changed section number as a changed tax outcome without comparison.
6. Evidence and document checklist
- Official Act text and commencement provisions.
- Tax-year and assessment-year mapping.
- Portal form instructions and utility version.
- Legacy notice, order or proceeding documents.
- Working paper comparing old and new provisions for material positions.
7. Common mistakes
- Choosing the Act only by the return-filing date.
- Copying old section numbers into new-year documents.
- Assuming simplification means every tax rule changed.
- Ignoring preserved proceedings and transition provisions.
8. Red flags
- Portal form and legal citation do not match the tax year.
- Payroll or withholding engine uses old thresholds after a new-year change.
- Advice cites a Bill or draft instead of enacted law.
- No reconciliation between book tax and return position.
9. Complaint or escalation route
Use the e-filing portal grievance and help channels for technical issues. Substantive disputes should follow the statutory response and appeal process. Material transition positions should be documented and reviewed by a qualified tax professional.
10. FAQs
Did the 1961 Act stop mattering on 1 April 2026?
No. Earlier periods and preserved proceedings can continue under the legacy framework.
Which Act governs a return filed in July 2026 for FY 2025–26?
Use the official transition and form guidance; the income period predates commencement of the new Act.
Can old case law still be relevant?
Potentially, where the principle and statutory language remain comparable, but applicability must be analysed.
Should every contract replace old section numbers immediately?
Update references for the correct tax year and transaction; preserve legacy references where they govern earlier obligations.
11. Official sources
- Income Tax Department — Objective and scope of the new Act
- Income Tax Department — Guide to Income-tax Act 2025 forms
- Income Tax e-filing portal
Information date: 20 June 2026. Rates, thresholds, portal processes and live proceedings can change; use the linked official material for the transaction or filing date.