Income-tax Act, 2025: what changes for investors, and the new section numbers

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. If you are an ordinary investor, the short version is that the deductions you know are still there under new numbers, and the Act adds no new tax. The Central Board of Direct Taxes (CBDT) published the official questions and answers on the new Act. It says plainly: "The income Tax Act, 2025 does not impose any new tax."

What changed is the wording, the numbering, the names of a few forms and the way a year is described.

What is the Income-tax Act, 2025?

The Income-tax Act, 2025 is the law that replaced the Income-tax Act, 1961, and it has applied since 1 April 2026. It was enacted as No. 30 of 2025 and published in the Gazette of India on 21 August 2025.

It is a rewrite, not a new tax. It has 536 sections and 16 schedules, against 819 sections and 14 schedules in the old Act. A section is one numbered rule in the law. A schedule is a list at the end of the Act that a section points to, such as the list of items that qualify for a deduction.

CBDT says the aim is "to present the same tax policy in a more logical, accessible, and reader-friendly format". It also lists simpler language, clearer structure and fewer disputes over meaning as goals.

Which law applies to your 2025-26 and 2026-27 income?

Income you earned from April 2025 to March 2026 is still taxed under the Income-tax Act, 1961. Income from 1 April 2026 falls under the 2025 Act. CBDT is explicit that a return for 2025-26 "is therefore governed entirely by the old Act", even though you file it after 1 April 2026.

A return is the form in which you report your income and tax to the department. A financial year is the twelve months from 1 April to 31 March.

Nobody files two returns in 2026-27. The return for tax year 2026-27 only arises after that year ends. Under the 2025 Act, the old Act still applies to pending cases. It also applies to notices, assessments and appeals about any tax year that began before 1 April 2026.

Take Suresh, 41, a salaried man who invests in an ELSS fund (an equity fund with a three-year lock-in) and a PPF (Public Provident Fund) account. He filed his return for 2025-26 income (assessment year 2026-27) in 2026 under the old Act, with the old section numbers. His employer's tax certificate for 2026-27 will come as Form 130 by 15 June 2027, and his return for tax year 2026-27 is due 31 July 2027.

What is a "tax year"?

A tax year is the twelve months of a financial year starting on 1 April, and it is the period in which you earn the income. The Act defines it as "the twelve months period of the financial year commencing on the 1st April."

It replaces two old terms. The "previous year" was the year you earned income. The "assessment year" was the year after, in which that income was assessed. CBDT says using both "was causing confusion among taxpayers as they referred to two different financial years".

What used to be called financial year 2026-27, assessment year 2027-28, is now simply tax year 2026-27. A new source of income, such as a business just started, has its first tax year from the day it begins to the end of that financial year.

One practical consequence: section 123 (the old Section 80C) counts amounts "paid or deposited in the tax year". A payment has to be made by 31 March 2027 to count for tax year 2026-27.

Which section numbers changed, and to what?

The familiar sections are still there under new numbers, and the Income Tax Department publishes its own table of old and new numbers. The one below uses that table, read on 2 October 2026.

Four terms first. A deduction lowers the income your tax is worked out on. A rebate lowers the tax itself. A regime is one of the two ways your tax is worked out: the default regime, now section 202, or the old one you can opt for. TDS is tax deducted before money reaches you.

NPS is the National Pension System. The government's own savings scheme pages still use some old numbers. For the limits and conditions behind the first three rows, see deductions under 80C, 80CCD and 80D.

For rent and home loans, see tax benefits on rent and home loan tax benefits.

Which forms have new names?

From tax year 2026-27, Form 16 becomes Form 130, Form 16A becomes Form 131 and Form 26AS becomes Form 168. The list that matters to most investors:

• Form 130 replaces Form 16, the certificate your employer gives you showing tax deducted from your salary. For tax year 2026-27 it is due on 15 June 2027.
• Form 131 replaces Form 16A, the TDS certificate for income other than salary.
• Form 168 replaces Form 26AS, and CBDT calls it the Annual Information Statement.
• Form 121 replaces both Form 15G and Form 15H, the declarations for receiving certain incomes without TDS being deducted. The eligibility rules stay the same.
• Form 124 replaces Form 12BB, the statement in which an employee tells the employer about claims.

The return forms keep their names: ITR-1 (Sahaj), ITR-2 and ITR-4 (Sugam). CBDT says the new forms will be notified well before the due dates. For how to file, see how to file your income tax return.

What did not change for investors?

CBDT says the Act adds no new tax, and the rules investors use most carry on under their new numbers. Here is what stays as it was:

• Capital gains. The rates and holding periods, and the ₹1,25,000 yearly allowance on long-term equity gains, have applied since 23 July 2024. The Finance Act, 2026 did not amend them. See tax on mutual fund redemption.
• The ₹1,50,000 limit. For individuals and HUFs (Hindu Undivided Families), section 123 still allows up to ₹1,50,000 in total across all its items, and it is not available under the default regime. CBDT says the section "retains the Rs 1.5 lakh aggregate deduction".
• The default regime. It still applies unless you choose the old one. Its first slab is nil tax up to ₹4,00,000. Slabs are in the new tax regime.
• The rebate. Under section 156 (the old Section 87A), a resident on the default regime whose income does not exceed ₹12 lakh gets a rebate of the tax, up to ₹60,000. If you also have capital gains, the rebate works differently — see tax on mutual fund redemption.
• ELSS. The three-year lock-in stands, and CBDT confirms the 2005 ELSS scheme continues. See ELSS funds.

One real change for fund investors came with the Finance Act, 2026. IDCW, the payouts some funds make from income or gains, is taxed as "income from other sources". From 1 April 2026, you cannot deduct any interest expense against it. See growth vs IDCW.

What happens to deductions and losses from before April 2026?

They carry over. A capital loss carried forward from a tax year before 1 April 2026 still counts. It can be set off against capital gains for up to eight financial years after the year it was first worked out. CBDT adds that this works "only in the manner the old Act allowed".

A deduction you claimed under the old Act stays allowed. If you later break its conditions, the amount is added to your income in the year the breach happens, not in the earlier year.

Salary follows the same split. Tax deducted on salary up to March 2026 followed the old rules. For tax year 2026-27, employers restart the calculation from 1 April 2026 using projected income, deductions and the regime that applies.

What should you do differently now?

Mostly nothing, beyond using the new names and dates. A few points are worth keeping in mind:

• Your certificates and statements for 2026-27 will carry the new form numbers.
• Want the old regime and have no business income? It has to be picked in each year's return, filed by the due date.
• A payment must be made by 31 March 2027 to count under section 123 for tax year 2026-27.
• Koshex, as a distributor, helps with the ELSS / section 123 decision each financial year. Koshex also sells tax-saving fixed deposits. A tax-saving deposit counts towards section 123 only under the old regime. See fixed deposits.

For ways to cut tax, read how to save tax in India. For the PPF, ELSS and NPS comparison, see PPF, ELSS or NPS. For why filing matters, see why file a return.