The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026. It received Presidential assent on 21 August 2025, and the Income-tax Rules, 2026 were notified on 20 March 2026 to operate alongside it.

For most businesses, the tax itself does not change overnight. What changes is the language of compliance: the year, the sections, the rules and the forms. This article sets out what a business owner or finance team needs to know, and what to update first.

One "tax year" instead of two years

The 1961 Act taxed the income of a "previous year" in the following "assessment year". The 2025 Act uses a single "tax year", which is the financial year in which income is earned. The first tax year under the new Act is 2026-27, running from 1 April 2026 to 31 March 2027.

The Income Tax Department's transition FAQs confirm that there is no missing year or overlap. Income of FY 2025-26 is assessed in AY 2026-27 under the 1961 Act, using the return forms and the tax audit forms (3CA, 3CB and 3CD) notified under the old rules, even where they are filed after 1 April 2026.

Where the familiar provisions have moved

The new Act groups many provisions into tables. The table below lists the references businesses meet most often.

Common references under the 1961 Act and the 2025 Act
Subject1961 Act and Rules, 19622025 Act and Rules, 2026
Tax auditSection 44AB; Forms 3CA, 3CB and 3CDSection 63; Form 26
TDS on salarySection 192; Form 24Q; Form 16Section 392; Form 138; Form 130
TDS on other payments to residentsSections 193 to 194T; Form 26Q; Form 16ASection 393 (tables); Form 140; Form 131
TDS on payments to non-residentsSection 195; Form 27QSection 393 (tables); Form 144
TCSSection 206C; Form 27EQ; Form 27DSection 394; Form 143; Form 133
Lower or nil deduction certificateSection 197; Form 13Section 395; Form 128
Declaration for no deductionSection 197A; Forms 15G and 15HSection 393(6); Form 121
Annual information statementForm 26AS and AISForm 168
Fee for late TDS or TCS statementsSection 234ESection 427
Fee for a late returnSection 234FSection 428
Return due datesSection 139Section 263
Payments to micro and small enterprisesSection 43B(h)Section 37(2)(g)

Thresholds and rates for most items have been carried into the new tables. For example, fees for professional services above ₹50,000 in a year remain subject to TDS at 10% under the usual provision, and fees for technical services at 2%. Payments to resident contractors continue at 1% where the contractor is an individual or HUF and 2% for others, above ₹30,000 for a single payment or ₹1,00,000 in a year.

Which Act applies to a transaction near 1 April 2026

For TDS, the transition FAQs look at the event that triggers deduction: credit to the payee's account or payment, whichever is earlier. If that event happened before 1 April 2026, the 1961 Act applies. If it happened on or after 1 April 2026, the 2025 Act applies.

This matters for March 2026 invoices that were paid in April 2026, and for provisions made at the year end. Keep the date of credit in your records, not only the date of payment. The same logic applies to remittances abroad: Form 15CA and Form 15CB are replaced by Form 145 and Form 146, and a remittance made on or after 1 April 2026 uses the new forms, even where the income itself is taxed under the 1961 Act.

Changes made by the Finance Act, 2026

The Finance Act, 2026 amended the new Act before it came into force. Changes that affect day-to-day business compliance include:

  • Supply of manpower is expressly treated as "work", so contractor rates of TDS apply to it.
  • The due date for returns of businesses and professionals not requiring audit moves from 31 July to 31 August. This already applied to returns for AY 2026-27, due 31 August 2026.
  • A resident individual or HUF buying immovable property from a non-resident can deduct and deposit TDS without obtaining a TAN, from 1 October 2026, using Form 141 and issuing Form 132.
  • on scrap, alcoholic liquor, tendu leaves and minerals such as coal, lignite and iron ore is 2% from 1 April 2026.

What to update now

  1. If not already done, update section codes in your accounting software, TDS software and payment approval formats, and check that the statement for the first quarter (due 31 July 2026) and the second quarter (due 31 October 2026) use sections 392 to 394.
  2. Review purchase orders, invoice templates and payment formats that quote sections of the 1961 Act. Existing contracts do not need to be amended merely because the new Act has come into force.
  3. Tell vendors and employees about the new certificates: Form 131 instead of Form 16A and Form 130 instead of Form 16.
  4. Plan the tax audit for tax year 2026-27 on Form 26, and keep FY 2025-26 on the old forms.
  5. Reconcile your books with Form 168 from tax year 2026-27, as you did with and .

The substance of a well-run compliance process does not change: accurate books, timely deductions and a reconciliation before every return. What needs attention is the set of references around it.

Before relying on this article: section, rule and form numbers are taken from the Income Tax Department's published material as of September 2026. Check the current text for your facts, and note that the Finance Act of each year may change rates and thresholds.

Sources