Income Tax Act 2025: Applicability From 1 April 2026
The Income-tax Act, 2025 took effect on 1 April 2026. But does the new law apply to income earned before that date, returns filed in 2026 or notices issued under the Income-tax Act, 1961? This guide explains which Act applies and why.
1. When did the Income-tax Act, 2025 come into force?
The Income-tax Act, 2025 (Act 30 of 2025) received Presidential assent on 21 August 2025. Under Section 1(3), it came into force on 1 April 2026, save as otherwise provided in the Act. Section 1(2) extends the Act to the whole of India. The Central Board of Direct Taxes also notified the Income-tax Rules, 2026 to operationalise the new law.
The commencement date is not the same as the date of enactment. The law was enacted in August 2025, but its principal operative provisions commenced in April 2026.
2. What does 'Tax Year' mean under the new Act?
Section 3 defines a tax year as the twelve-month period of the financial year commencing on 1 April, subject to its special rules where a business or profession is newly set up or a source of income newly comes into existence. The expression replaces the old Act's general use of 'previous year'; the separate 'assessment year' terminology is discontinued for periods governed by the 2025 Act.
For example, income earned between 1 April 2026 and 31 March 2027 falls in Tax Year 2026-27. Filing or assessment may take place after that tax year ends, but this does not make the income part of an 'Assessment Year 2027-28' under the new Act.
3. Which law applies to income before and after 1 April 2026?
| Income period or matter | Applicable law | Practical consequence |
|---|---|---|
| FY 2025-26 (1 April 2025 to 31 March 2026) | Income-tax Act, 1961 | Return for AY 2026-27 follows the old Act and applicable forms. |
| Tax Year 2026-27 (1 April 2026 to 31 March 2027) | Income-tax Act, 2025 | Income, advance tax and other compliance are governed by the new Act, subject to relevant provisions. |
| Older tax demand or appeal concerning FY 2024-25 | Income-tax Act, 1961 | Relevant old-law proceedings can continue even after 1 April 2026. |
| New notice issued after 1 April 2026 for an earlier tax period | Generally Income-tax Act, 1961 | Section 536 saves initiation and continuation of proceedings for earlier years. |
It is therefore incorrect to assume that every notice, return or tax dispute after 1 April 2026 must be governed by the new Act. The relevant income period and nature of proceeding are decisive.
4. What happens to pending notices, assessments and appeals?
Section 536 (Repeal and savings) is the principal transitional provision. Although it repeals the Income-tax Act, 1961, it preserves rights, liabilities, orders and actions arising under that Act. In particular, Section 536(2)(c) continues the old Act for proceedings concerning tax years beginning before 1 April 2026, whether those proceedings were already pending or are initiated later. These include notices, assessments, reassessments, rectification, penalties, revisions and appeals.
Existing appeals or proceedings before tax authorities, tribunals or courts may therefore continue under the earlier statutory framework. Section 536 also addresses the continuity of compatible approvals, notifications, rules, schemes and other instruments. Its operation is supplemented by Section 6 of the General Clauses Act, 1897.
5. What changes for taxpayers from 1 April 2026?
Income tax returns
A return filed in 2026 for FY 2025-26 / AY 2026-27 remains governed by the 1961 Act. Returns relating to Tax Year 2026-27 are governed by the 2025 Act and the applicable rules and forms. Always select the correct period on the e-filing portal.
Advance tax and TDS
Advance tax obligations relating to Tax Year 2026-27 arise under the new framework. TDS and TCS provisions have been reorganised and renumbered; taxpayers and deductors should verify the correct statutory provision, applicable rate, threshold, payment deadline and reporting form for the relevant transaction and period.
Tax rates and regimes
The 2025 Act is principally a legislative simplification and restructuring. It does not mean that every rate, exemption or deduction changed automatically on 1 April 2026. Rates and other fiscal changes must be checked against the applicable Finance Act and the relevant provisions. The default new tax regime continues under Section 202 of the 2025 Act, subject to statutory conditions and options.
Old registrations and approvals
Section 536 contains continuity provisions for approvals, registrations, recognitions and notifications under the old law to the extent provided and where consistent with the new Act. Do not assume that every approval needs to be obtained afresh solely because the statute changed.
6. Practical examples of applicability
Example 1: Salary earned in March 2026
Salary earned during March 2026 falls within FY 2025-26. It is ordinarily reported for AY 2026-27 under the Income-tax Act, 1961, even though the return is filed after the new Act commenced.
Example 2: Business income earned in July 2026
Business income earned in July 2026 falls in Tax Year 2026-27 and is governed by the Income-tax Act, 2025, subject to applicable provisions and transitional rules.
Example 3: Reassessment notice issued in September 2026 for AY 2023-24
The notice concerns an earlier period. Section 536 generally preserves the application of the 1961 Act to the proceeding. The notice must still independently satisfy the applicable statutory requirements, including limitation and procedural safeguards.
Example 4: Refund for AY 2024-25
A refund entitlement under the old Act is not lost merely because the 2025 Act commenced. The applicable savings provisions govern continuity, including specific transitional treatment of interest where relevant.
7. Frequently asked questions
Is the Income-tax Act, 1961 completely inapplicable after 1 April 2026?
No. Although repealed, it continues to apply to earlier tax years and saved proceedings under Section 536.
Which Act applies to ITR filed in July 2026 for FY 2025-26?
The Income-tax Act, 1961, because the return relates to AY 2026-27 and income earned before 1 April 2026.
What is the first tax year under the Income-tax Act, 2025?
Tax Year 2026-27, beginning on 1 April 2026.
Are pending tax appeals automatically dismissed?
No. The repeal-and-savings framework allows eligible proceedings and appeals relating to earlier periods to continue.
Did tax slabs automatically change because of the new Act?
No. The 2025 Act's commencement should not be confused with changes made by annual Finance Acts. Check the applicable rates for the relevant tax year.
8. Conclusion
The key distinction is between the date the new law commenced and the period to which a tax liability or proceeding relates. From 1 April 2026, the Income-tax Act, 2025 governs new tax years, while Section 536 protects continuity for earlier years under the 1961 Act. Taxpayers should identify the correct period and legal provision before filing a return, responding to a notice or challenging a demand.
Official legal references
Updated: 13 November 2026. This article provides general legal information, not advice on a particular assessment or dispute.