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Introduction:
The Government of India has published the Income Tax Act, 2025 and Income Tax Rules, 2026 on April 01, 2026 with an intention to streamline and simplify its predecessor (Income Tax Act, 1961). The provisions in the newly enacted law has effectively reduced the compliance burden for taxpayers and is more reader friendly.
Repealment of Income Tax Act 1961
With the introduction of the new act, with effect from April 01, 2026, Income Tax Act, 1961 shas been repealed.
Analysis on key changes in Income Tax Act, 2025
Contents in the New Act and Rules
Content | Particulars | Changes vs IT Act, 1961 |
Total Sections | 536 Sections | Total sections have been reduced by 283. |
Total Schedules | 16 Schedules | Schedules have increased by 2 |
Total Rules | 333 Rules | Total sections have been reduced by 173. |
Total Forms | 190 Forms | Total sections have been reduced by 209. |
Introduction of Tax Year:
The old concept of Previous Year and Assessment Year has now been done away with. The new Income Tax Act now has combined the two terminologies into a single terminology defined as “Tax Year”.
The change means, from April 01, 2026, Tax Year (TY) has been aligned with Financial Year (FY). For example, FY 2026-27 = TY 2026-27
Income earned during the tax year will continue to be taxed in the subsequent Tax Year as per applicable due dates provided in Section 263 of Income Tax Act, 2025.
Heads of Income:
There are Five Heads of Income in continuation from the Old Act. The Section covering the five heads are as tabulated below: –
Head of Income | Section in the New Act (2025) |
Salaries | Sections 15–19 |
House Property | Sections 20–25 |
Profit and Gains from Business and Profession | Sections 26–66 |
Capital Gains | Sections 67–91 |
Other Sources | Sections 92–95 |
Deductions under Chapter VI | Sections 123 to 156 |
Important changes introduced under the head “Income from Salaries”:
Total value of tax–free perquisites has increased to Rs. 4,00,000 under Section.
Children Education Allowance has been increased to Rs. 3,000 per month per child for 2 children. [Rule 280 of Income Tax Rules, 2026]
Hostel Expenditure Allowance has been increased to Rs. 9,000 per month per child for 2 children. [Rule 280 of Income Tax Rules, 2026]
Tuition Fees still continuous to be allowed as deduction under Section 123 of the New Act. (However, such deduction from the Gross Total Income will only be allowed if the assessee opts to be taxed under the Old Tax Regime).
Exempt perquisite for Meal/ Food Coupons has increased to Rs 200 per meal.
Gifts/ Festival Voucher is exempt upto Rs. 15,000 per year
Motor Car Allowance has increased to Rs. 8,000 for vehicles with cubic capacity < or = 1.6L and Rs. 10,000 in other cases.
Driver perquisite has increased to Rs 3,000 per month.
Limit for Mandatory Disclosure of PAN has been modified for the following transactions
S. No. | Category | Transaction Limit for mandatory disclosure of PAN |
1 | Cash Deposits | If Cash Deposit exceeds Rs. 10,00,000 (Ten Lakhs) in a year in aggregate. |
2 | Cash Withdrawals | If Cash Withdrawals exceeds Rs. 10,00,000 (Ten Lakhs) in a year in aggregate. |
3 | Property Transactions | If the transaction value exceeds Rs. 20,00,000 (Twenty Lakhs). |
4 | Vehicle Purchase | If the transaction value exceeds Rs. 5,00,000 (Five Lakhs). |
5 | Hotel/ Events | If the transaction value exceeds Rs. 1,00,000 (One Lakh). |
6 | Insurance | Mandatory for all cases irrespective of the premium limit. |
Removal of mandatory requirement of obtaining TAN for Purchase of Property from Non-Resident by a Resident Buyer
With effect from October 1, 2026, the TDS deduction on purchase consideration value on purchase of property from non-resident sellers can be made through PAN alone without obtaining a TAN Number. However, the deduction is covered as per section 392 (2) sl. No 17 at 12.5 % (in case of LTCG) or 30 % (in case of STCG) along with surcharge (if applicable) and cess.
Due dates for Income Tax Returns (Section 293 (1))
Taxpayer | ITR Form | Due Date |
Salaried Individuals/ HUF’s | ITR-1, ITR-2 | July 31 of the Tax Year |
Small businesses and Professionals (Non– Audit Cases) | ITR-3, ITR-4 | August 31 of the Tax Year |
All taxpayers requiring Audit (except transfer pricing) | ITR-3, ITR-5, ITR-6 | October 31 of the Tax Year |
Transfer Pricing cases | ITR-3, ITR-5, ITR-6 | November 30 of the Tax Year |
Extension of due date to file revised returns
Henceforth, Income Tax Returns can be revised upto March 31 of the Financial Year succeeding the relevant tax year.(Section 293(2))
However, a belated return (where a taxpayer has missed to file the Income Tax Return (ITR) by the original due date), must file the belated return before December 31 of the Financial Year succeeding the relevant tax year. (Section 293(3))
Interpretation: If the initial Income Tax Return is filed before December 31 of the Financial Year succeeding the relevant tax year, the return can be revised before March 31 of the Financial Year succeeding the relevant tax year, or before the assessment of the return concludes.
Rule 47 of Income Tax Rules, 2026
Tax Auditors are now required to provide the monetary impact of any qualifications or adverse remarks directly in the Tax Audit Report (Form 26), rather than just in a narrative note.
Payment of Advance Tax during the Financial Year of earning the Income (Section 408 of Income Tax Act, 2025)
Amount Payable | Due Date of Instalment |
Not less than 15% of the advance tax | On or before the 15th June. |
Not less than 45% of the advance tax, reduced by the amount, if any, paid in the earlier instalment | On or before 15th September. |
Not less than 75% of the advance tax, reduced by the amount or amounts, if any, paid in the earlier instalment or instalments | On or before 15th December. |
100% of the advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments. | On or before the 15th March. |
Changes made to House Rent Allowance
The basic exemption limit of 50% of the HRA has now been extended to cities Bengaluru, Pune, Hyderabad, and Ahmedabad.
Under the new income tax rules, it is now mandatory to provide the landlord’s PAN and disclose the relationship with the landlord for claiming HRA.
Important Frequently Asked Questions (FAQ’s) issued by the Income Tax Department.
Determination of TDS for contracts or services spanning over the period of March–April 2026
Earlier event of credit or payment for the transaction determines applicability of Income Tax Act for challan payment purpose.
If earlier event of credit or payment lies on or before 31 March 2026 → TDS provisions under the Income Tax Act, 1961 will apply.
If earlier event of credit or payment lies on or after 01 April 2026 → TDS provisions under section 393 of Income Tax Act, 2025 will apply.
Applicability of the Provisions in the Old Act for proceedings already initiated/ initiated against income earned in prior years.
The provisions of Income Tax Act, 1961 will continue to govern all tax years beginning before 1st April, 2026.
All assessments, appeals, and other proceedings relating to earlier years will continue to be conducted under the old Act until their final resolution.
Applicability of old approvals, registrations, and recognitions granted under the old Income Tax Act.
If the approvals are not inconsistent with the provisions of the new Act, they are treated as if granted under the new Act.
Validity of Permanent Account Number, Tax Deduction Account Number granted ad per the provision of the Old Act
The Existing Permanent Account Number, Tax Deduction Account Number (TAN), faceless assessment, faceless appellate framework, etc., shall continue under the Income Tax Act 2025.
Validity of Lower/ NIL Deduction Certificates issued under the old act
Certificates issued under Section 197 of the Income-tax Act, 1961 shall remain valid for payments/credits made on or after 1st April, 2026 provided that it is issued for lower/Nil deduction of tax in respect of projected receivable for tax year 2026- 27.
Status of unutilised Minimum Alternate Tax (MAT)/Alternate Minimum Tax (AMT) credits allowable to be carried forward under the old Act.
Any unutilised credit for MAT/AMT allowed to be carried forward under the provisions of section 115JAA or 115JD of the Income Tax Act, 1961, are treated as eligible credits under the Income Tax Act, 2025.
Unutilised credits can be carried forward for a total of 15 years from the year they first became available. The un-utilised MAT credit can be set off for a tax year commencing on or after 01.04.2026, subject to the conditions prescribed in the Income Tax Act, 2025.
What will happen to refund claims arising under the Income-tax Act, 1961 that are pending on the commencement of the Income-tax Act, 2025?
Rights, benefits, obligations or liabilities that arose under the old Act continue to exist. Thus, if a taxpayer was entitled to claim a refund under the old Act for any tax year prior to the commencement of the new Act, they still remain entitled to that refund even after the new Act comes into force.
Carry Forward of losses incurred in the previous years to the new act
Losses determined for AY 2026-27 under the old Act can be carried forward and set off in Tax Year 2026-27 and subsequent tax years under the new Act, subject to the conditions prescribed. Section 536(2)(b) protects rights acquired under the old Act, and the carry-forward of losses is one such right subject to fulfilment of specified conditions.
Correction of TDS Returns filed under the old act
Corrections to TDS returns for periods governed by the old Act can be filed even after the new Act has come into force. Such correction statements can be furnished within a period of two years from the end of the tax year in which the original statement was due.
The FAQ’s can be accessed through the link:
TDS Sections in the old act consumed by Section 392 of the new Income Tax Act
Sub-section Reference | Nature of Transaction / Payment | Replaced Old Section | Threshold Limit | New TDS Rate | Updated Compliance Form |
Section 392(1) | Regular Salary Disbursal | 192 | Basic Exemption Limit | Average Rate (per slab) | Form 130 (Annual Certificate) |
Section 392(2) | Non-Monetary Perquisites (Employer Paid) | 192(1A) | No Threshold | Average Rate (per slab) | Form 143 (Quarterly Return) |
Section 392(3) | Deferral of Tax on Start-up ESOPs | 192(1C) | Sale/Transfer Event | Average Rate (per slab) | Form 143 (Quarterly Return) |
Section 392(4) | Income/Loss Adjustments (Other Sources) | 192(2B) | No Threshold | Slab Dependent Adjustment | Form 124 (Employee Declaration) |
Section 392(6) | Premature Provident Fund (PF) Withdrawal | 192A | ₹50,000 | 10% | Form 143 (Quarterly Return) |
Section 392(7) | Premature PF Withdrawal (No PAN Case) | 192A | ₹50,000 | Maximum Marginal Rate | Form 143 (Quarterly Return) |
TDS Sections in the old act consumed by Section 393 of the new Income Tax Act
Section in the new act along with Sl. No. in the table | Nature of Payment | Replaced Old Section | Threshold Limit (Per Year unless otherwise stated) | New TDS Rate |
Section 393(1) – Sl. No. 1 | Interest on Securities | 193 | Rs.10,000 | 10% |
Section 393(1) – Sl. No. 2 | Dividend Distributions | 194 | Rs.10,000 | 10% |
Section 393(1) – Sl. No. 3(i) | Interest (Banks/Co-op/Post Office) | 194A | Rs.50,000 OR Rs.10,00,000 (for Senior Citizens) | 10% |
Section 393(1) – Sl. No. 3(ii) | Interest (Other than Banks) | 194A | Rs.10,000 | 10% |
Section 393(1) – Sl. No. 4 | Winnings from Lottery / Games | 194B | Rs.10,000 (per transaction) | 30% |
Section 393(1) – Sl. No. 6(i) | Contractor Payments (Individual/HUF) | 194C | Rs.30,000 (as a single payment) OR Rs.1,00,000 (in aggregate) | 1% |
Section 393(1) – Sl. No. 6(ii) | Contractor Payments (Others/Firms) | 194C | Rs.30,000 (as a single payment) OR Rs.1,00,000 (aggregate) | 2% |
Section 393(1) – Sl. No. 6(iii) | Professional / Technical Fees | 194J | Rs.50,000 | 2% or 10% |
Section 393(1) – Sl. No. 7 | Insurance Commission | 194D | Rs.20,000 | 5% |
Section 393(1) – Sl. No. 10 | General Commission and Brokerage | 194H | Rs.20,000 | 2% |
Section 393(1) – Sl. No. 11(i) | Rent (Land and Buildings) | 194I | Rs.50,000 per month | 10% |
Section 393(1) – Sl. No. 11(ii) | Rent (Plant and Machinery) | 194I | Rs.50,000 per month | 2% |
Section 393(1) – Sl. No. 12 | Income from Mutual Fund Units | 194K | Rs.10,000 | 10% |
Section 393 – Other Cases | Purchase of Immovable Property | 194-IA | Rs.50,00,000 (cumulative) | 1% |
Section 393 – Other Cases | Purchase of Goods | 194Q | Rs.50,00,000 | 0.10% |
Section 393 – Other Cases | Business Perks / Benefits | 194R | Rs.20,000 | 10% |
TCS Sections in the old act consumed by Section 394 of the new Income Tax Act
Receipt Category / Nature of Goods | Replaced Old Section | Threshold Limit | New TCS Rate |
Alcoholic Liquor (Human Consumption) | 206C(1) | No Threshold | 1% |
Scrap | 206C(1) | No Threshold | 1% |
Tendu Leaves | 206C(1) | No Threshold | 5% |
Minerals (Coal, Lignite, Iron Ore) | 206C(1) | No Threshold | 1% |
Motor Vehicles | 206C(1F) | Above ₹10 Lakh | 1% |
Luxury Goods (Bags, Watches, Footwear, etc.) | 206C | Above ₹10 Lakh | 1% |
Overseas Tour Packages | 206C(1G) | No Threshold | 5% (up to ₹7L) / 20% (above ₹7L) |
LRS Remittance (Education/Medical) | 206C(1G) | Above ₹10 Lakh | 5% (0.5% if via loan) |
LRS Remittance (Other purposes) | 206C(1G) | Above ₹10 Lakh | 20% |
Parking Lot / Toll Plaza / Mining Lease | 206C(1C) | No Threshold | 2% |
IMPORTANT FORMS WHICH ARE RENUMBERRED IN THE NEW ACT
New Form No. (IT Rules 2026) | Replacing Form No. (as per IT Rules, 1962) | Description |
24 | 3CE | Audit Report under section 59 for computation of royalty and fee for technical services in the case of non–resident (not being a company) or a foreign company |
26 | 3CA, 3CB, 3CD | Audit report and Statement of particulars required to be furnished under section 63 |
28 | 3CEA | Report of an accountant to be furnished by an assessee under section 77(4) of the Act relating to the computation of capital gains in the case of slump sale |
29 | 62 | Certificate from the principal officer of the amalgamated company and duly verified by an accountant regarding achievement of the prescribed level of production and continuance of such level of production in subsequent years |
30 | 10-IA | Certificate of the medical authority for certifying ‘person with disability‘, ‗severe disability‘,’autism‘, ‗cerebral palsy‘ and ‘multiple disability‘ for purposes of section 127 and section 154 of the Act. |
31 | 10BA | Declaration to be filed by the assessee for claiming deduction under section 134 of the Act for rents paid |
32 | New Form | Audit report under section 46, 138, 139, 140(8), 141, 142, 143 and 144 of the Act |
33 | 56FF | Particulars to be furnished in respect of units established under Special Economic Zone for claiming deduction under section 144 of the Act |
34 | 10DA | Report for deduction in respect of additional employee cost under section 146 of the Act |
38 | 10H | Certificate of foreign inward remittance |
39 | 10E | Form for claiming relief under section 157(1) of the Act in case of receipt of additional salary, or gratuity or Retrenchment Compensation or commutation of pension |
41 | 10F | Information to be provided under section 159(8) |
42 | 10FA | Application for Certificate of residence for the purposes of an agreement under section 159(1) and 159(2) |
43 | 10FB | Certificate of residence for the purposes of section 159 |
44 | 67 | Statement of income from a country or region outside India and Foreign Tax Credit |
45 | New Form | Intimation of settlement of dispute regarding foreign tax for which credit has not been claimed |
46 | New Form | Exercise of option for determination of arm‘s length price (ALP) under section 166(9) |
47 | New Form | Certificate of an accountant under section 166 |
48 | 3CEB | Report from an accountant to be furnished under section 172 relating to international transaction(s) and/or specified domestic transaction(s) |
51 | 3CED & 3CEDA | Application for an Advance Pricing Agreement (APA) |
52 | 3CEF | Annual Compliance Report on Advance Pricing Agreement |
54 | New Form | Application for Renewal of an Advance Pricing Agreement (APA) |
65 | 3CFA | Form for opting for taxation of income by way of royalty in respect of patent |
66 | 29B | Report for Computation of Book Profit for the purposes of section 206(1) of the Act |
67 | 29C | Report for computation of adjusted total income and alternate minimum tax for the purposes of section 206(2) of the Act |
68 | 10-IG | Statement of exempt income under Schedule VI [Table: Sl. Nos. 1 to 4] |
74 | 64 | Statement of income paid or credited by Venture Capital Company or Venture Capital Fund to be furnished under section 222 |
75 | New Form | Statement of income paid or credited by Venture Capital Company or Venture Capital Fund to be provided to the person who is liable to tax under section 222 |
93 | 49A | Application for Allotment of Permanent Account Number |
94 | 49A | Application for Allotment of Permanent Account Number [For an Indian Company / an Entity incorporated in India/ an Unincorporated Entity formed in India] |
95 | 49AA | Application for Allotment of Permanent Account Number [For an Individual not being a Citizen of India] |
96 | 49AA | Application for Allotment of Permanent Account Number [For an Entity incorporated outside India/ an Unincorporated Entity formed outside India] |
97 | 60 | Form for declaration to be filed by any person (other than a company or firm) or a foreign company covered by sub-rule (2) to rule 159 , who does not have a permanent account number and who enters into any transaction specified in rule 159 |
98 | 61 | Statement containing particulars of declaration received in Form No. 97 |
99 | 35 | Appeal to the Joint commissioner of Income-tax (Appeals) or the Commissioner of Income-tax (Appeals) |
104 | 10A | Application for provisional registration or provisional approval |
105 | 10AB | Application for registration of non-profit organisation under section 332 or approval under section 354 |
106 | 10AC | Order for provisional registration under section 332 or provisional approval under section 354 Rejection of application |
107 | 10AD | Order for grant of registration under section 332 or approval under section 354 or rejection of application or cancellation of registration or approval granted |
108 | 9A | Exercise of option under section 341(7) in respect of amount applied for charitable or religious purposes |
109 | 10 | Statement of accumulation or setting apart of income under section 342(1) |
110 | New Form | Application for change of purpose of accumulation or setting apart of income under section 342(5) |
111 | New Form | Order under section 342(6) on the request for change of purpose of accumulation or setting apart of income |
112 | 10B & 10BB | Audit report under section 348 in the case of a registered non-profit organisation (NPO) |
115 | 36 | Form of appeal to the Appellate Tribunal |
134 | 49B | Form for allotment of TAN – Government entities (mandatory AIN and PAO/ZAO/DTO/CDDO certificate) |
135 | 49B | Form for allotment of TAN – Entities other than Government (Individual/HUF, business, LLP, firm, company, statutory body) |
138 | 24Q | Quarterly statement of deduction of tax under section 397(3)(b) of the Act in respect of salary paid to employee under section 392, or income of specified senior citizen under section 393(1) [Table: Sl. No. 8(iii)] |
140 | 26Q | Quarterly statement of deduction of tax under section 397(3)(b) in respect of payments made other than salary |
141 | 26QB, 26QC, 26QD, 26QE | Challan-cum-statement of deduction of tax under section 393(1) [Table Sl. No. 2(i), 3(i), 6(ii) and 8(vi)] |
142 | 26QF | Quarterly statement of tax deposited in relation to transfer of virtual digital asset under section 393(1) |
143 | 27EQ | Quarterly statement of collection of tax at source under section 397(3)(b) |
144 | 27Q | Quarterly statement of deduction of tax under section 397(3)(b) in respect of payments other than salary made to non-residents |
145 | 15CA | Information to be furnished for payments to a non-resident not being a company, or to a foreign company |
146 | 15CB | Certificate of an accountant for payments to a non-resident, not being a company or to a foreign company |
167 | New Form | Statement to furnish information on transaction of crypt-asset under section 509 |
168 | 26AS. | Annual Information Statement |
169 | New Form | Application for registration as a valuer under section 514 |
170 | New Form | Report of valuation of Asset under section 514 |
184 | 40A/40B | Form of nomination/modifying nominations for provident/gratuity fund |
186 | 40C | Application for recognition of provident fund under Part-A of the Schedule XI to the Act |
188 | New Form | Application for approval of superannuation fund or gratuity fund |
References
1. Income Tax Act
2. Income Tax Rules
3. https://www.incometaxindia.gov.in/income-tax-act-20251
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