Income Tax
Old Section 2 Definitions vs New Income-tax Act 2025 Definitions Mapping: Complete Guide for 2026
Reviewed by CA Nikhil Gupta · Last reviewed 26 September 2026
Official sources cited: incometaxindia.gov.in | incometax.gov.in | Income Tax Act 2025 (egazette.gov.in)
The Income Tax Act, 2025 replaced the Income Tax Act, 1961 on 1 April 2026 — ending 65 years and roughly 4,000 amendments of the old law. The foundational change begins at Section 2: all key definitions have been reorganised, renumbered, and in some cases substantively revised. The tax rates and deduction limits remain the same — but if you're a CA, payroll professional, CFO, or even an informed salaried taxpayer, you need to map the old definitions to new ones to stay compliant. This guide gives you a comprehensive, practical mapping of the most important definitional changes.
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Open CalculatorThe Big Picture: What Changed and What Didn't
The Income Tax Act, 1961 had grown to over 700 sections and become notoriously difficult to navigate. The Income Tax Act, 2025, enacted after decades of tax reform advocacy, consolidates everything into 536 sections across 23 chapters and 16 schedules. The key facts every professional needs to know:
- Effective date: 1 April 2026 — all Tax Year 2026-27 (FY 2026-27) compliance uses new section numbers
- FY 2025-26 returns (filed July 2026): Old Act 1961 still applies — use old section numbers in your ITR
- Tax rates unchanged: No rate hikes or reductions on account of the new Act alone
- Deduction limits unchanged: ₹1.5 lakh under new Section 123 (old 80C), ₹25,000/₹50,000 under new Section 126 (old 80D), etc.
- Section 2 of old Act → Section 2 of new Act (Chapter I, Preliminary): the general definitions stay in Section 2 with new clause numbers (for example, "agricultural income" is now Section 2(5)); a few chapters also carry their own interpretation sections (for example, Section 355 for registered non-profit organisations)
Payroll and ERP Teams — Immediate Action Required: From 1 April 2026, all TDS challans, TDS certificates, and payroll software must reference new section numbers. If your system still generates salary TDS under "Section 192," you need to update to "Section 392(1)" of the new Act. CBDT has issued updated payment codes — ensure your bank and software vendor has applied them.
The Most Important New Concept: "Tax Year" Replaces Previous Year + Assessment Year
The single biggest definitional change that affects every taxpayer, every return, and every compliance calendar is the abolition of the Previous Year / Assessment Year duality.
| Old Concept (Act 1961) | New Concept (Act 2025) | Practical Impact |
|---|---|---|
| Previous Year (Section 3 of 1961 Act) | Tax Year (Section 3 of 2025 Act) | The income-earning year IS the Tax Year. No more parallel tracking. |
| Assessment Year (Section 2(9) of 1961 Act) | Abolished as a separate concept | Tax is now assessed "for" the Tax Year, not "in" the next year. Cleaner language. |
| AY 2026-27 = PY 2025-26 | Tax Year 2026-27 = April 2026 to March 2027 | From July 2027 returns, you cite Tax Year 2026-27 directly. |
| Return filing due: 31 July of the assessment year (non-audit) | Return due after the tax year ends: 31 July (ITR-1 / ITR-2), 31 August (non-audit business or profession cases and trusts), 31 October (audit cases) | The 31 August date for non-audit business and professional returns came in through the Finance Act, 2026 and already applies to AY 2026-27 - it is not a new-Act change. |
Calendar Impact: Under the old Act, "Assessment Year 2026-27" was a confusing concept — it was the year AFTER you earned the income. Under the new Act, Tax Year 2026-27 IS the year you earn income. This aligns India with global practice (US, UK, Singapore all use the income year as the base). Separately, the Finance Act, 2026 moved the due date for non-audit business and professional returns (ITR-3 / ITR-4) and trusts from 31 July to 31 August, starting with AY 2026-27; ITR-1 and ITR-2 filers stay at 31 July.
Key Section 2 Definitions — Old Act vs New Act Mapping
Old Section 2 of the Income Tax Act, 1961 contained 48 sub-clauses defining everything from "agricultural income" to "total income." In the 2025 Act, these are reorganised under Section 2 but also distributed across the relevant chapters for context. Here is the essential mapping:
Core Definitional Mapping Table
| Definition | Old Act 1961 Reference | New Act 2025 Reference | Change? |
|---|---|---|---|
| Agricultural income | Section 2(1A) | Section 2(5) | Substance unchanged; numbering updated |
| Assessee | Section 2(7) | Section 2(11) | Numbering updated |
| Assessment | Section 2(8) | Section 2(13) | Numbering updated |
| Assessment Year | Section 2(9) | ABOLISHED — replaced by Tax Year | Major structural change |
| Business | Section 2(13) | Section 2(20) | Numbering updated |
| Capital asset | Section 2(14) | Section 2(22) | Numbering updated; capital-gains computation sits in Chapter IV (from Section 67) |
| Company | Section 2(17) | Section 2(28) | Numbering updated |
| Income | Section 2(24) | Section 2(49) | Inclusive definition carried forward; numbering updated |
| Person | Section 2(31) | Section 2(77) | Same seven categories retained |
| Previous Year | Section 3 | ABOLISHED — Tax Year substituted | Major conceptual change |
| Tax Year | Did not exist | Section 3 (new concept) | New — replaces PY+AY duality |
| Salary / perquisite | Section 17 | Sections 16 (salary), 17 (perquisite) and 18 (profits in lieu of salary); charge in Section 15 | Old Section 17 split into three sections; salary-allowance exemptions sit in Schedule III |
| Dividend | Section 2(22) | Section 2(40) | Numbering updated; deemed-dividend limbs remain inside the definition |
| Fair market value | Section 2(22B) | Section 2(44) | Numbering updated |
| Recognised provident fund | Section 2(38) | Section 2(91) | Numbering updated |
Definitions That Changed Substantively
Most definitions are renumbered rather than rewritten. Points practitioners most often ask about:
- "Accountant" (Section 2(1)): now takes its meaning from Section 515(3)(b) - check that provision (and any prescribed conditions) before deciding who may sign an audit report or certificate
- "Charitable purpose" (Section 2(23)): keeps the same limbs - relief of the poor, education, yoga, medical relief, environment, monuments and advancement of any other object of general public utility. Yoga was already listed in the old Section 2(15).
- "Tax year" (Section 3): replaces both "previous year" and "assessment year" - the central new concept in the definitions
The TDS Section Mapping — The Most Practical Change
Under the old Act, every type of TDS payment had its own section (194A for interest, 194C for contractors, 194J for professionals). The 2025 Act consolidates all TDS provisions into a single Section 393, with payment-type codes replacing section sub-clauses. This is the most disruptive day-to-day operational change.
| Payment Type | Old TDS Section | New TDS Reference (Act 2025) | Rate Change? |
|---|---|---|---|
| Salary | Section 192 | Section 392(1) | No — slab rates unchanged |
| Interest (bank/bonds) | Section 194A | Section 393 — Interest code | No change: the ₹1 lakh senior-citizen threshold has applied since 1 April 2025; the no-TDS declaration is now Form 121 (replaces 15G/15H) |
| Contractor payments | Section 194C | Section 393 — Contractor code | 1%/2% rate unchanged |
| Rent | Section 194I | Section 393 — Rent code | 10% rate unchanged |
| Professional fees | Section 194J | Section 393 — Professional code | 10% rate unchanged |
| Dividend | Section 194 | Section 393 — Dividend code | 10% rate unchanged (threshold ₹10,000 since 1 April 2025) |
| Purchase of property | Section 194IA | Section 393 — Property purchase code | 1% rate unchanged (above ₹50 lakh) |
| TCS on LRS remittances | Section 206C | Section 394 | Check the current Section 394 table for LRS thresholds and rates |
Compliance Risk from 1 April 2026: If your accounts payable team or ERP system still generates TDS challans with old section numbers (e.g., "194J" on a challan for professional fees paid after 1 April 2026), this creates a mismatch with CBDT's TDS return system. CBDT has issued new payment codes for the consolidated Section 393. Your bank's NEFT/RTGS system and TDS software must be updated. Late payment of TDS attracts interest under the TDS provisions, and short payment of advance tax or late returns attracts interest under new Sections 423, 424 and 425 (old 234A, 234B and 234C).
Case Study: Swati at TechNova Solutions — Payroll Update Post 1 April 2026
HR Manager, Bengaluru — Managing 450-Employee Payroll Transition
TechNova Solutions processes payroll for 450 employees. Until March 2026, their HR software deducted salary TDS under "Section 192" and professional fee TDS under "Section 194J." From 1 April 2026, the new Act required references to Section 392(1) and the consolidated Section 393 respectively.
- Issue discovered: Their HR software vendor hadn't updated the section codes. April 2026 TDS challans were still being generated with old section numbers.
- Risk: CBDT's TRACES system would flag the mismatch when the Q1 TDS return was filed, potentially triggering demand notices for incorrect filing.
- Action taken: Swati escalated to the vendor, who issued an emergency patch by 15 April 2026. They filed revised challans for April using the correct new codes. No penalty resulted.
- Lesson for HR teams: Contact your payroll software vendor immediately to confirm compliance with new Act section codes. Don't wait for the Q1 TDS return deadline.
Old Salary TDS Section
Section 192
New Salary TDS Section
Section 392(1)
Old Professional Fee TDS
Section 194J
New Professional Fee TDS
Section 393 — Prof. Code
Top 25 Section Mapping — Quick Reference for Practitioners
| Old Act 1961 Section | Common Name / Purpose | New Act 2025 Section |
|---|---|---|
| Section 2(9) | Assessment Year | ABOLISHED (Tax Year replaces) |
| Section 3 | Previous Year definition | Section 3 (Tax Year) |
| Section 10 | Exempt incomes | Section 11 read with Schedules II to VII |
| Section 10(13A) | HRA exemption | Schedule III, Table Sl. No. 11 (with Rule 279) |
| Section 24(b) | Home loan interest deduction | Section 22(1)(b) |
| Section 40(a)(ia) | TDS disallowance in business | Section 35(b)(i) |
| Section 43B | Deduction only on actual payment | Section 37 |
| Section 44AB | Tax audit threshold | Section 63 |
| Section 44AD | Presumptive tax for business | Section 58 |
| Section 44ADA | Presumptive tax for professionals | Section 58 |
| Section 50C / 43CA | Stamp duty value — property | Section 78 / Section 53 |
| Section 54 | LTCG exemption — residential property | Section 82 |
| Section 54EC | LTCG exemption — infrastructure bonds | Section 85 |
| Section 54F | LTCG exemption — other assets | Section 86 |
| Section 80C | Investments deduction | Section 123 |
| Section 80D | Health insurance deduction | Section 126 |
| Section 80E | Education loan interest deduction | Section 129 |
| Section 80TTA | Savings interest deduction | Section 153 |
| Section 80TTB | Senior citizen interest deduction | Section 153 (same section, separate limb) |
| Section 115BAC | New tax regime | Section 202 |
| Section 139 | Filing of income tax return | Section 263 |
| Section 143(1) | Processing of return / summary assessment | Section 270 |
| Section 148 | Notice for reassessment | Section 280 |
| Section 192 | TDS on salary | Section 392(1) |
| Section 194C / 194J / 194A etc. | TDS on non-salary payments | Section 393 (consolidated) |
Senior Citizen Changes — Specific Definitional Updates
Several definitional changes in the 2025 Act specifically benefit senior citizens:
- Form 15G and 15H merged into Form 121: The two separate self-declaration forms for non-deduction of TDS have been consolidated into a single Form 121 under the 2025 Act. The eligibility conditions remain the same (nil tax liability), but the paperwork is simpler.
- TDS threshold on interest for senior citizens - ₹1 lakh: this was raised from ₹50,000 to ₹1 lakh by the Finance Act, 2025 with effect from 1 April 2025 (old Section 194A), and it continues in the Section 393 table - TDS on bank/post-office interest applies only when a senior citizen's annual interest from one payer exceeds ₹1 lakh.
- Return due dates: senior citizens filing ITR-1 or ITR-2 (pension, interest, capital gains) still have until 31 July after the year ends. The 31 August date applies only to non-audit business or professional returns (ITR-3 / ITR-4) and trusts.
What Happens to Notices and Proceedings Under Old Act?
A key survival provision — Section 536 of the new Act — addresses what happens to ongoing assessments, appeals, and notices issued under the old 1961 Act:
- Old Act proceedings continue under old Act: If an assessment, appeal, or scrutiny proceeding relates to AY 2025-26 or earlier, it stays governed by the 1961 Act sections. The 2025 Act does not apply retrospectively.
- Old circulars and notifications survive: Section 536(2)(j) confirms that CBDT circulars, notifications, and instructions issued under the old Act remain valid and applicable to the equivalent provision of the new Act, as long as they don't conflict with the new Act's text.
- Options exercised under old Act transfer: If you exercised an option (e.g., opting for the new tax regime, or choosing 44AD presumptive taxation) under the old Act, that election is treated as made under the equivalent provision of the new Act.
Case Study: Ramesh Gupta CA — Handling a Reassessment Notice Straddling Both Acts
Chartered Accountant, Delhi — Client Received Notice Under Section 148 in May 2026
CA Ramesh Gupta received a reassessment notice on behalf of a client in May 2026. The notice was for AY 2022-23 (income earned in FY 2021-22). The notice was issued under Section 148 of the Income Tax Act, 1961.
- Question: Does the new Act apply to this notice issued in May 2026?
- Answer: No. Per Section 536 of the Income Tax Act, 2025, proceedings relating to any period before 1 April 2026 remain governed by the 1961 Act. The old Act's Section 148 applies (its new-Act counterpart is Section 280).
- Practical action: Ramesh filed the response under old Act provisions, citing Section 148 and relevant old-Act reassessment procedure (Sections 147–151). The new Act's simplified reassessment framework applies only from Tax Year 2026-27 onwards.
- Key takeaway: Keep two reference frameworks handy in 2026–27 — old Act for everything up to AY 2025-26, new Act for Tax Year 2026-27 onwards.
Notice Period
AY 2022-23
Governing Law
Income Tax Act, 1961
Old Section Applied
Section 148
New Act Equivalent (for future)
Section 280
Section 2 Definitions Transition — Key Points to Remember
- New Act applies from Tax Year 2026-27 (FY 2026-27); old Act governs FY 2025-26 and earlier
- "Tax Year" replaces Previous Year + Assessment Year — a conceptual simplification, not a rate change
- Salary TDS (old Section 192) moves to Section 392; non-salary TDS sections (old 193 to 194T) are consolidated into Section 393; update ERP/payroll codes
- Section 80C is now Section 123 — deduction limit unchanged at ₹1.5 lakh
- Section 10 exemptions now sit in Section 11 read with Schedules II to VII - cite the Schedule and table serial number (for example, HRA is Schedule III, Table Sl. No. 11), not "Section 10(X)"
- Form 15G + Form 15H merged into new Form 121; the ₹1 lakh senior-citizen interest threshold (in force since 1 April 2025) continues
- Return due dates: 31 July for ITR-1/ITR-2, 31 August for non-audit business or professional cases and trusts (from AY 2026-27), 31 October for audit cases
- Old-Act notices and proceedings for AY 2025-26 and earlier continue under old Act — Section 536 protects this
- Check incometax.gov.in/iec/foportal for the official FAQ and section navigator tool
✅ Transition Checklist: What Finance Teams Must Do Now
- Update payroll software to reference Section 392(1) for salary TDS (not Section 192)
- Update AP/vendor payment software to use Section 393 codes (not 194C/194J/194A etc.)
- Replace references to "Assessment Year 2026-27" with "Tax Year 2026-27" in internal documents
- Update employment letters and offer letters that reference specific Income Tax sections
- Inform employees about the new Form 121 (replaces Forms 15G/15H) for TDS exemption declarations
- Update MIS templates, audit reports, and tax working papers with new section references
- Review pending appeals and proceedings to confirm which Act applies (pre/post April 2026)
- Ensure statutory registers and board resolutions referencing Income Tax sections are updated
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Frequently Asked Questions
The Income Tax Act, 2025 came into force on 1 April 2026, replacing the Income Tax Act, 1961. It received Presidential assent on 21 August 2025 after passing both Lok Sabha (11 August 2025) and Rajya Sabha. For FY 2025-26 (AY 2026-27) — the return you file in July 2026 — the old Act still applies. The new Act applies from Tax Year 2026-27 onwards, meaning returns filed from July 2027 will use the new section numbers.
The Income Tax Act, 1961 used two confusing parallel concepts: 'Previous Year' (the year in which income was earned) and 'Assessment Year' (the year in which tax is assessed, one year later). The 2025 Act abolishes both and replaces them with a single concept: 'Tax Year', defined under Section 3 as the 12-month period from 1 April to 31 March — the financial year itself. So 'Tax Year 2026-27' means FY 2026-27 (April 2026 to March 2027). This aligns India with global practice and eliminates the Previous Year/Assessment Year confusion for practitioners and taxpayers.
Yes, the benefit of Section 80C continues — the deduction of up to ₹1,50,000 for specified investments (ELSS, PPF, LIC, EPF, home loan principal, etc.) is retained. However, the section number has changed to Section 123 in the Income Tax Act, 2025. The deduction limit of ₹1,50,000 is unchanged and remains available only under the old tax regime. Your employer's payroll system will reference Section 123 from Tax Year 2026-27 onwards.
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