From 1 April 2026, India replaced the six-decade-old Income-tax Act, 1961 with the Income-tax Act, 2025, along with a freshly notified Income-tax Rules, 2026 — the biggest rewrite of India’s direct tax law in decades. The transition is layered, and several changes are still being phased in through the Finance Act, 2026. Below is a clear, cross-checked breakdown of what has changed and what hasn’t.
1. The core structural change: “Tax Year” replaces PY and AY
For income earned on or after 1 April 2026, the Act scraps the old Previous Year / Assessment Year split in favour of a single, unified “Tax Year.” Income earned between 1 April 2026 and 31 March 2027 is Tax Year 2026-27 — the same label for earning, filing and assessment — ending the PY-vs-AY confusion for good. The first return under this system will be filed in 2027; for the return you are filing this season (FY 2025-26 / AY 2026-27), the old Act still governs.
2. A leaner statute, not a new tax regime
The new Act trims the law from 819 sections to 536 (retaining the same 23-chapter structure, now with 16 schedules instead of 14), and the accompanying Rules shrink from 500-plus to 333. Obsolete provisions are dropped and language simplified, but tax rates, slabs and the core scheme of taxation are unchanged. Both the old regime (with deductions such as 80C and 80D) and the deduction-light new regime continue to coexist — the choice is still yours.
3. TDS is being consolidated — a big deal for businesses and landlords
From Tax Year 2026-27, all TDS provisions — previously scattered across 40-plus sections such as 194C and 194J — are consolidated into a single Section 393. Alongside this: Forms 15G/15H (nil-TDS declarations) merge into Form 121; the TDS threshold on bank/deposit interest stays at ₹50,000 for most depositors but is ₹1 lakh for senior citizens; TDS on non-exempt life-insurance payouts remains at the reduced 2% (in place since October 2024, now folded into Section 393); and property-related TDS forms 26QB, 26QC, 26QD and 26QE consolidate into a single Form 141. A Finance Act, 2026 amendment has also settled a long-running dispute: manpower-supply services are now explicitly treated as “Work” rather than a “professional service,” so standard contractor TDS rates (1% for individuals/HUFs, 2% for others) apply instead of the higher professional rate.
4. NRI property deals get simpler — but only from 1 October 2026
From 1 October 2026, individual and HUF buyers purchasing immovable property from an NRI seller will be able to discharge their TDS obligation using a PAN-based challan-cum-statement, without first obtaining a TAN. Until then, a TAN is still mandatory for such purchases — this is a genuine simplification on the horizon, not yet in effect. Separately, NRI foreign-asset reporting requirements have also been tightened, so NRIs and returning residents should review their disclosure obligations carefully.
5. Two asset classes to watch: Crypto and Sovereign Gold Bonds
Virtual Digital Assets (VDAs) now have a wider definition with tightened reporting and tracking obligations; the tax treatment itself — a flat 30% on gains, with 1% TDS on transfers above the prescribed threshold — stays the same. Separately, the capital-gains exemption on maturity of Sovereign Gold Bonds now applies only to investors who bought at the original issue and held them to maturity. If you purchased SGBs on the secondary market, redemption proceeds will attract capital gains tax.
6. Updated returns (ITR-U): more history, but pricier and time-barred
The updated-return window has been widened to 48 months from the end of the relevant assessment year, but it is simultaneously getting costlier to use. The window for FY 2020-21 (AY 2021-22) closed permanently on 31 March 2026. For later years, the additional fee for filing an updated return rises in stages (25%/50%/60%/70% of tax-plus-interest, depending on when you file). Treat ITR-U as a last resort — filing an accurate or timely revised return remains far cheaper.
7. Your familiar forms are being renumbered — Form 26AS becomes Form 168
A wide set of everyday compliance forms are being renumbered under the Income-tax Rules, 2026, once Tax Year 2026-27 filings begin: Form 26AS becomes Form 168, and Form 16 becomes Form 130. Forms 16A, 24Q, 26Q and 27Q are also being renamed. The content and purpose stay the same — this is an administrative relabelling, not a new document. Importantly, this applies only from Tax Year 2026-27 onward: for the return you are filing this season (FY 2025-26 / AY 2026-27), you still use the existing Form 16 and Form 26AS. Banks, payroll systems and lending platforms should update their processes ahead of next year’s filing cycle.
8. Sending money abroad gets a bit cheaper — TCS on remittances eased
Tax Collected at Source on foreign remittances under the Liberalised Remittance Scheme (LRS), previously under Section 206C(1G) of the 1961 Act, now sits under Section 394 of the new Act, effective 1 April 2026. The ₹10 lakh annual threshold per PAN is unchanged, but the rate above that threshold for education and medical remittances drops from 5% to 2%, and the rate for overseas tour packages also drops to a flat 2% with no threshold. Remember that TCS is only an advance tax — fully adjustable against your final tax liability, or refundable, when you file your return.
9. PAN–Aadhaar linking is now a standalone statutory requirement
Section 262 of the new Act requires every person who holds a PAN and is eligible for an Aadhaar number to link the two, failing which the PAN becomes inoperative — blocking TDS credit, refunds and other PAN-linked compliance. This carries forward an existing requirement, but its placement as a dedicated section signals continued strict enforcement. If you haven’t linked yours yet, treat it as a priority.
10. Old notices, assessments and appeals keep running under the old Act
If you have a pending assessment, reassessment, penalty, rectification or appeal relating to a tax year that began before 1 April 2026, it stays governed by the Income-tax Act, 1961, start to finish, even if the order is passed after that date. This is written into the new Act’s repeal-and-savings clause (Section 536), and the e-filing portal will run both frameworks side by side for as long as older matters remain open. An old notice doesn’t suddenly convert to “new Act” rules midway through — check which tax year it relates to before assuming which law applies.
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