India’s 65-year-old tax law is gone. The new Income Tax Act 2025 is live from April 1, 2026. Here is what actually changed for salaried employees, retirees and investors.
The Income Tax Act, 2025 came into force on April 1, 2026, replacing the Income Tax Act, 1961 that had governed India’s taxes for 65 years. This is the most significant structural overhaul of Indian tax law since Independence. This article explains it in plain language for salaried employees, retirees, and investors — not for lawyers.
New Income Tax Act 2025: What Changed for You from April 2026?
On April 1, 2026, India’s tax system entered a new era. The Income Tax Act, 1961 — a law that had survived 65 years, hundreds of amendments, and countless Budget sessions — was officially repealed. In its place came the Income Tax Act, 2025, passed by Parliament on August 12, 2025, and notified into force by the Central Board of Direct Taxes (CBDT).
The immediate question on every taxpayer’s mind: will I pay more tax? The short answer is no. The new Act does not impose any new tax. The tax rates, slabs, and most deductions remain unchanged. What changed is the structure, language, and ease of compliance — making a law that had become almost unreadable into something more navigable.
But that does not mean nothing changed for you. There are several practical changes that directly affect your tax filing, your forms, and your deductions starting this financial year. Let us go through each one clearly.
Think of it this way. Imagine your 65-year-old home has been extensively renovated. The walls are still the same, the rooms serve the same purpose, but the wiring has been cleaned up, the cluttered storage removed, and the floor plan made logical. Your house did not become a new house. But navigating it became much easier. That is what the Income Tax Act, 2025 has done to Indian tax law.
Change 1: The law itself became dramatically simpler
The Income Tax Act, 1961 had grown into a monster over six decades. It had 819 sections, 47 chapters, and hundreds of provisos and sub-clauses — many contradicting each other or referring to clauses that no longer existed.
| Income Tax Act, 1961 | Income Tax Act, 2025 |
| 819 sections | 536 sections |
| 47 chapters | 23 chapters |
| 511 rules with 399 forms | 333 rules with 190 forms |
| Verbose narrative language | Tables and formulas replace long narratives |
| TDS in 60+ scattered sections (192 to 194T) | All TDS in 3 sections (392, 393, 394) |
For a common taxpayer, this does not change your tax liability by one rupee. But for accountants, companies doing payroll, and people reading their tax notices — it becomes far less confusing.
Change 2: Goodbye ‘Assessment Year’ — hello ‘Tax Year’
This is the change that will confuse the most people in the short term, but is genuinely helpful once understood.
Under the old system, India had two confusing time concepts:
- Previous Year = the year in which you earned the income (e.g., April 2024 – March 2025)
- Assessment Year = the year in which you file the return for that income (e.g., April 2025 – March 2026)
This caused constant confusion. When you filed your ITR, you always had to remember: am I filing for AY 2025-26 or PY 2024-25? The answer was often both, just referred to differently.
The new Act simplifies this with a single concept: Tax Year. From April 1, 2026:
Tax Year = the year in which you earned the income AND for which you will file the return. Income earned from April 1, 2026 to March 31, 2027 = Tax Year 2026-27. That is it. One name. One period. No more translating between two frames of reference.
Important: Your return for FY 2025-26 (the year that just ended) is still filed under the old system as Assessment Year 2026-27 using the old Income Tax Act, 1961. The first return filed under the new Act will be in July 2027 for Tax Year 2026-27.
Change 3: Your familiar forms have new names
This is the most immediately practical change. The forms you use every year for TDS, tax filing, and declarations have been renumbered. Here is the complete guide:
| Old form (1961 Act) | New form (2025 Act) | Purpose |
| Form 15G / Form 15H | Form 121 | Declaration to avoid TDS when income is below taxable limit (MOST IMPORTANT CHANGE) |
| Form 16 | Form 130 | Annual TDS certificate issued by employer to employee |
| Form 26AS | Form 168 | Annual tax passbook / tax credit statement |
| Form 24Q | Form 138 | Quarterly salary TDS return filed by employer |
| Form 26Q | Form 140 | Quarterly TDS return for non-salary payments |
| Form 16A | Form 131 | TDS certificate for non-salary payments (rent, interest, professional fees) |
| Form 13 (Lower TDS certificate) | Form 128 | Application for lower or nil TDS deduction certificate |
Important for salaried employees: Your employer will issue Form 130 (not Form 16) for Tax Year 2026-27. But here is the catch — the Form 16 your employer gives you in June 2026 for FY 2025-26 is still the old Form 16 under the 1961 Act. The new Form 130 will only appear in June 2027 for Tax Year 2026-27. Do not panic if your employer issues you Form 16 in 2026 — that is still correct.
Change 4: Form 121 — the single biggest practical change for retirees and senior citizens
This one deserves special attention because it directly affects every retiree, senior citizen, homemaker, and low-income earner who has bank FDs or other interest-generating investments.
What was the old system?
If your total income was below the taxable limit and you did not want your bank to deduct TDS on your FD interest, you had to submit:
- Form 15G — if you were below 60 years of age
- Form 15H — if you were 60 years or above (senior citizen)
Same purpose, two different forms. This caused constant confusion — people submitted the wrong form, banks rejected declarations, and money was unnecessarily deducted as TDS.
What is the new system from April 1, 2026?
One form for everyone: Form 121.
The age distinction is gone. Whether you are 30 or 75, if your total income is below the taxable threshold and your tax liability is zero, you submit Form 121 to your bank, post office, or any payer to prevent TDS deduction.
| Old system | New system from Apr 2026 |
| Two forms: 15G and 15H based on age | One form: Form 121 for all ages |
| Different eligibility rules for each form | Single unified eligibility criteria |
| No unique tracking number | Every Form 121 gets a 26-character UIN for tracking |
| Manual process at bank counter | Digital submission available through banks |
| Wrong form = rejection = unnecessary TDS deducted | Single form = no confusion = correct compliance |
Who should submit Form 121?
Submit Form 121 to your bank if ALL of the following apply to you:
- Your total income for Tax Year 2026-27 (April 2026 – March 2027) will be below the basic exemption limit
- Your total estimated tax liability for the year is zero
- You receive interest income, dividends, rent, or pension from which TDS can be deducted
If you are a retiree with only FD interest and pension income, and your total annual income is below Rs.12 lakh (zero tax under new regime), submit Form 121 to every bank where you have an FD. Do this in April, before the first interest credit. A late submission will not prevent TDS that has already been deducted.
Change 5: All TDS sections merged into just 3
Under the old law, TDS had over 60 separate sections (Section 192 for salary, 194C for contractors, 194J for professionals, 194I for rent, and so on). Each had its own threshold, rate, and conditions. Staying compliant required knowing which section applied to each payment.
The new Act consolidates all of this into three parent sections:
| New Section | Covers | What it replaces |
| Section 392 | TDS on Salary | Old Section 192 (salary TDS) |
| Section 393 | TDS on all non-salary payments | All 194-series sections (194C, 194J, 194I, 194N etc.) |
| Section 394 | TCS (Tax Collected at Source) | All old TCS provisions (206C, etc.) |
The rates themselves are largely unchanged. What changed is the section numbering and the logical grouping. For individual salaried employees, this change is invisible — your employer handles it. But if you are self-employed, run a business, or are a landlord receiving rent, your accountant will need to reference the new sections from April 1, 2026.
Change 6: Every section you know as a salaried employee has been renumbered
This is the change that will confuse the most people in daily life — far more than anything else in the new Act. When your HR team asks for your Section 80C investment proof, when your CA references Section 24(b) for your home loan, when you look at your Form 16 for Section 80D — all of those familiar numbers have been renamed.
The benefits are completely identical. Not a single rupee of deduction has been reduced. What changed is purely the address of each benefit in the statute. Think of it like a building that has been renumbered — the same offices exist, serving the same purpose, but the door numbers are different.
The single most important thing to read: Your ITR filing in July 2026 for FY 2025-26 still uses ALL the old section numbers — 80C, 80D, 24(b), 87A — exactly as before. The new section numbers apply only from July 2027 onwards, when you file for Tax Year 2026-27. You do not need to memorise anything new for the upcoming tax season.
Part A: Deductions you claim to reduce taxable income (Chapter VI-A)
These are the deductions most salaried people use to lower their tax every year. All of them survive in the new Act — just under new section numbers. Most are available only under the old tax regime.
| Old Section | New Section | What it covers | Limit / Benefit | Regime |
| Section 80C PPF, ELSS, LIC, EPF, NSC, 5yr FD, tuition fees, home loan principal, SSY | Section 123 | The most-used deduction in India. All popular tax-saving instruments. Absolutely unchanged — same instruments, same Rs.1.5 lakh ceiling. | Rs.1.5 lakh/yr | Old regime only |
| Section 80CCC Pension fund contributions (LIC annuity plans) | Section 123 | Merged into Section 123 alongside 80C. Still counts within the Rs.1.5 lakh combined limit. No change to what qualifies. | Within Rs.1.5L cap | Old regime only |
| Section 80CCD(1) Employee’s own NPS contribution | Section 124 | Your personal contribution to NPS Tier-I account. Counts within the Rs.1.5 lakh combined cap of Section 80C. | Within Rs.1.5L cap | Old regime only |
| Section 80CCD(1B) Extra Rs.50,000 NPS deduction — over and above 80C | Section 124 | The additional Rs.50,000 deduction for voluntary NPS contribution, bringing total to Rs.2 lakh. Very popular with 30% bracket taxpayers. Completely unchanged. | Rs.50,000 extra | Old regime only |
| Section 80CCD(2) Employer’s NPS contribution — available in BOTH regimes | Section 124 | Deduction for what your employer contributes to your NPS. Private sector: up to 10% of basic+DA. Government: up to 14%. This is available in the NEW regime too — your most valuable new-regime tax saver if your employer offers it. | 10% or 14% of salary | Both regimes |
| Section 80D Health insurance premiums for self, spouse, children, parents | Section 126 | Self/spouse/children: Rs.25,000 (Rs.50,000 if senior citizen). Parents: additional Rs.25,000 (Rs.50,000 if senior citizen parents). Maximum possible: Rs.1 lakh when you and your parents are all senior citizens. | Rs.25K–Rs.1L/yr | Old regime only |
| Section 80E Education loan interest — no upper limit | Section 129 | Full deduction on interest paid on higher education loan for self, spouse, or children. No rupee ceiling. Available for 8 years from first repayment. One of the few uncapped deductions. | No limit, 8 yrs | Old regime only |
| Section 80EEA First-time home buyer extra interest deduction | Section 131 | Additional Rs.1.5 lakh deduction on home loan interest for first-time buyers — over and above the Rs.2 lakh Section 24(b) limit. Subject to property value and loan sanction date eligibility conditions. | Rs.1.5 lakh extra | Old regime only |
| Section 80G Donations to approved charities / PM funds | Section 133 | 50% or 100% deduction depending on the recipient. PM CARES, PM National Relief Fund = 100% deduction. Completely unchanged. | 50% or 100% | Old regime only |
| Section 80TTA Savings account interest (below 60 years) | Section 140 | Deduction on interest earned from savings bank accounts only. FD interest is NOT included. For taxpayers below 60 years of age. | Rs.10,000/yr | Old regime only |
| Section 80TTB Interest income for senior citizens (60+) | Section 140 | For senior citizens: covers savings account interest, FD interest, and post office deposit interest combined. Replaces 80TTA for those above 60. Higher limit and broader coverage. | Rs.50,000/yr | Old regime only |
The combined deduction under Sections 80C + 80CCC + 80CCD(1) is capped at Rs.1.5 lakh. Add 80CCD(1B) for another Rs.50,000. Add 80CCD(2) for employer NPS without any cap. Total possible: Rs.2 lakh + employer NPS. This structure is completely unchanged under the new Act.
Part B: Salary exemptions and allowances (what doesn’t get taxed from your salary)
These are not deductions you claim — they are components of your salary that are simply not taxed in the first place. Your employer handles most of these automatically through the payroll system.
| Old Section | New Section | What it covers | Limit / Benefit | Regime |
| Section 16(ia) Standard deduction — automatic flat deduction from gross salary | Section 22 | No proof, no investment needed. Just because you are salaried, you get this. New regime: Rs.75,000. Old regime: Rs.50,000. Pensioners also get it. Quietly saves Rs.7,800–Rs.15,600 in tax every year depending on your bracket. | Rs.75K (new) / Rs.50K (old) | Both regimes |
| Section 10(13A) HRA — House Rent Allowance exemption | Section 11 | Covers rent you pay minus 10% of salary, subject to actual HRA received and city factor. NEW from 2026: Bengaluru, Hyderabad, Pune, Ahmedabad now qualify for the higher 50% rate (previously 40%). Submit rent receipts and landlord PAN to your employer. | Actual HRA or formula | Old regime only |
| Section 10(5) LTA — Leave Travel Allowance | Section 11 | Exemption on actual travel costs (flight / train) for domestic travel with family. Allowed twice in a block of 4 calendar years. Keep boarding passes and tickets as documentary proof. | Actual travel cost | Old regime only |
| Section 10(14) Special allowances — meal, uniform, telephone, children education | Section 11 | Various prescribed allowances partially or fully exempt. Children education allowance: Rs.100/month per child (up to 2 children). Hostel allowance: Rs.300/month per child. Meal allowance, uniform allowance — within limits. | Varies by allowance | Both regimes |
| Section 10(10) Gratuity at retirement or resignation | Section 11 | Gratuity received at retirement / separation. Government employees: fully exempt. Private sector employees covered under Gratuity Act: exempt up to Rs.20 lakh. Applies automatically — no action needed during employment. | Rs.20 lakh (private) | Both regimes |
| Section 10(10AA) Leave encashment at retirement | Section 11 | Exemption on earned leave encashed at retirement. Private sector: exempt up to Rs.25 lakh (raised from Rs.3 lakh in 2023). Government employees: fully exempt. Unchanged. | Rs.25 lakh (private) | Both regimes |
Part C: Home loan, tax rebate, and capital gains (most searched by salaried investors)
These sections affect you both as a salaried employee and as an investor. Every salaried person who has a home loan, holds mutual funds, or earns interest income needs to know these.
| Old Section | New Section | What it covers | Limit / Benefit | Regime |
| Section 24(b) Home loan interest deduction | Section 74 | Interest paid on home loan. Self-occupied property: Rs.2 lakh cap under old regime (not available in new regime). Let-out property: no upper limit in both regimes. One of the main reasons high-income earners stay on the old regime. | Rs.2L (self-occ old regime) | Self-occ: old only |
| Section 87A Tax rebate — makes your entire tax zero | Section 204 | If your taxable income is within the limit, your entire tax is wiped out. New regime: Rs.60,000 rebate for income up to Rs.12 lakh (Rs.12.75L for salaried after standard deduction). Old regime: Rs.12,500 for income up to Rs.5 lakh. CRITICAL: Does NOT apply to LTCG/STCG at special rates. | Rs.60,000 (new) / Rs.12,500 (old) | Both regimes |
| Section 112A LTCG on equity mutual funds and shares | Section 195 | Long-term capital gains on listed equity shares and equity mutual funds held more than 12 months. Tax: 12.5% on gains above Rs.1.25 lakh per year. The Rs.1.25 lakh exemption is per year across all equity — not per fund. Completely unchanged. | 12.5% above Rs.1.25L | Both regimes |
| Section 111A STCG on equity mutual funds and shares | Section 194 | Short-term capital gains on listed equity shares and equity mutual funds held less than 12 months. Flat 20% tax. No exemption threshold. Completely unchanged. | Flat 20% | Both regimes |
| Section 234F Late filing fee for ITR | Section 274 | If you miss the July 31 deadline, Rs.5,000 late fee applies. Reduced to Rs.1,000 if total income is below Rs.5 lakh. File on time — this rule is completely unchanged. | Rs.5,000 / Rs.1,000 | Both regimes |
| Section 234A / 234B / 234C Interest on late / short tax payment | Sections 275, 276, 277 | 1% per month interest on unpaid tax if you file late, pay advance tax short, or miss installments. Completely unchanged. Always pay advance tax if liability exceeds Rs.10,000. | 1%/month interest | Both regimes |
Quick reference cheat sheet: old number – new number
For anyone who just wants the number mapping without explanation — here it is in the most compact form possible:
| Old (1961 Act) | New (2025 Act) | Old (1961 Act) | New (2025 Act) |
| Section 80C | Section 123 | Section 16(ia) — Std Deduction | Section 22 |
| Section 80CCC | Section 123 | Section 24(b) — Home Loan Interest | Section 74 |
| Section 80CCD(1) | Section 124 | Section 10(13A) — HRA | Section 11 |
| Section 80CCD(1B) | Section 124 | Section 10(5) — LTA | Section 11 |
| Section 80CCD(2) | Section 124 | Section 10(10) — Gratuity | Section 11 |
| Section 80D | Section 126 | Section 10(10AA) — Leave encashment | Section 11 |
| Section 80E | Section 129 | Section 87A — Tax rebate | Section 204 |
| Section 80EEA | Section 131 | Section 112A — LTCG equity | Section 195 |
| Section 80G | Section 133 | Section 111A — STCG equity | Section 194 |
| Section 80TTA / 80TTB | Section 140 | Section 234F — Late filing fee | Section 274 |
The WhatsApp myth that is spreading: Many people are receiving forwards claiming “80C has been abolished” or “senior citizens will now pay more” because of the new Act. This is completely false. Section 80C has been renamed Section 123. The deduction, the Rs.1.5 lakh limit, and every eligible instrument are exactly the same. Do not panic. Share this article with anyone who has received such a forward.
You do not need to memorise any of these new section numbers for the upcoming tax season. When you file your July 2026 ITR (for FY 2025-26), the portal will show the old section numbers. The new numbers will only appear on the portal from July 2027 onwards. Your CA and HR payroll system will handle the transition automatically. Your job is simply to make the same investments and declarations you always made.
Change 6: TDS threshold on bank interest raised to Rs.1 lakh
Previously, banks were required to deduct TDS on interest income exceeding Rs.40,000 per year (and Rs.50,000 for senior citizens). Under the new Income Tax Act, 2025, this threshold has been raised:
| Who | New TDS-free threshold on bank interest |
| General taxpayers (below 60) | Rs.1,00,000 per year |
| Senior citizens (60+) | Rs.1,00,000 per year |
This is especially helpful for retirees and small savers who live on FD interest. If your total FD interest income from one bank is below Rs.1 lakh in the year, no TDS will be deducted at source. You still need to declare this interest in your ITR and pay tax if your total income is taxable.
Change 7: More cities qualify for the higher HRA exemption
Under the old rules, only four metro cities qualified for the 50% HRA exemption: Delhi, Mumbai, Kolkata, and Chennai. All other cities got only 40%.
Under the Income Tax Rules, 2026, the list of cities qualifying for 50% HRA exemption has been expanded to:
- Delhi
- Mumbai
- Kolkata
- Chennai
- Bengaluru (newly added)
- Hyderabad (newly added)
- Pune (newly added)
- Ahmedabad (newly added)
If you live in Bengaluru, Hyderabad, Pune, or Ahmedabad and pay rent, your HRA exemption has just increased from 40% of basic salary to 50% of basic salary. This could meaningfully reduce your taxable income. Ask your employer’s payroll team to update this in your salary structure from April 2026.
Change 8: TCS on foreign remittances reduced to 2%
Under the Liberalised Remittance Scheme (LRS), when you send money abroad for education, travel, or other purposes, Tax Collected at Source (TCS) applies. The new rules from April 1, 2026 bring relief:
| Type of remittance | Old TCS rate | New TCS rate |
| Education (loan from financial institution) | 0.5% | 0.5% (unchanged) |
| Education (own funds, above Rs.10 lakh) | 5% | 2% |
| Medical treatment abroad | 5% | 2% |
| Foreign tour packages | 5% above Rs.7 lakh, 20% above Rs.10 lakh | Flat 2% |
| Other LRS remittances above Rs.10 lakh | 20% | 20% (unchanged) |
If you have a child studying abroad or travel internationally frequently, this is a meaningful reduction in the upfront cash outflow. Remember, TCS is not a final tax — it is credited against your tax liability when you file your return.
What has NOT changed: your core tax liability
The tax slabs, rates, and key deductions remain unchanged. Let this sink in before you worry:
- The new tax regime with Rs.12 lakh exemption continues as the default
- The old tax regime with 80C, 80D, HRA, LTA deductions remains available
- Section 80C (Rs.1.5 lakh) equivalent is preserved (renumbered to Section 123 in the new Act)
- Section 80D (health insurance) equivalent is preserved (renumbered to Section 126)
- PPF, EPF, NPS tax treatment is unchanged
- Capital gains tax rates (LTCG 12.5%, STCG 20%) are unchanged
- Your PAN, TAN, and old assessments remain fully valid
The government has simply reorganised the tax law into a cleaner structure. They have not used this reorganisation as a cover to sneak in higher taxes or remove major benefits. Your take-home pay will not change, your PPF and EPF benefits remain intact, and your ITR filing process remains similar. The only things changing are the form numbers, the section numbers, and some specific practical improvements described above.
Timeline: what applies when?
One of the biggest sources of confusion is when exactly the new Act applies to you. Here is a clear timeline:
| Period | Governing law | What you file |
| FY 2025-26 (ended Mar 2026) | Income Tax Act, 1961 | ITR for AY 2026-27 (July 2026) — use old forms, old sections |
| FY 2026-27 (Apr 2026 onwards) | Income Tax Act, 2025 (NEW) | ITR for TY 2026-27 (July 2027) — use new forms and sections |
| Past assessments (pre-2026) | Income Tax Act, 1961 (still applies to old year disputes) | Ongoing cases continue under old Act |
The ITR you file in July 2026 (for the year that just ended — April 2025 to March 2026) is still filed under the OLD Income Tax Act, 1961, with old form numbers. The new Act’s forms will only be relevant when you file in July 2027. So do not panic about immediately learning the new section numbers for your upcoming filing.
The digital-first, faceless future
Beyond the renaming and reorganisation, the new Act signals a clear digital-first direction for Indian tax administration:
- Faceless assessment procedures are now codified in the Act (reducing officer-taxpayer interface and potential for corruption)
- Automated system for granting lower TDS certificates (Form 128) — no more waiting for an officer to manually approve
- CBDT circulars are now legally binding on both tax authorities and taxpayers under Section 400(2) — removing ambiguity about whether a circular must be followed
- Decriminalisation of minor procedural TDS defaults — small technical errors will not lead to criminal proceedings
- Faster refunds post ITR filing mandated with prior notice required before enforcement
For ordinary taxpayers, these changes mean fewer disputes, faster refunds, and less harassment from the system. For businesses and professionals, it means tighter compliance requirements but clearer rules.
Your action checklist for April 2026
If you are a salaried employee:
- Check if your city (Bengaluru / Hyderabad / Pune / Ahmedabad) now qualifies for 50% HRA exemption — inform your employer payroll team
- Your Form 16 for FY 2025-26 will still be issued in the old format. Do not confuse it with Form 130
- Ensure your investment declarations for TY 2026-27 reference the new Act (your employer’s HR/payroll system should handle this)
If you are a retiree or senior citizen:
- Submit Form 121 (replacing Forms 15G/15H) to every bank or institution where you earn interest, dividend, or pension income
- Submit it BEFORE the first interest credit of the financial year — a late submission does not help retroactively
- Your PAN is mandatory on Form 121 — ensure your PAN-Aadhaar is linked
If you are self-employed or a business owner:
- Update your accounting software — TDS section references have changed. 194C is now 393, 194J is now 393, 192 is now 392
- Any TDS return for April 2026 onwards must use new section codes. Old codes will generate portal errors
- If you send money abroad through LRS, the TCS rate on foreign tour packages and education is now flat 2%
Everyone:
- Your ITR filing in July 2026 for FY 2025-26 is still under the old Act. No change needed for that filing
- Tax Year 2026-27 will be your first filing under the new Act (due July 2027)
- Your PAN, TAN, and all old assessments remain valid — no re-registration needed
Conclusion: should you be worried?
No. But you should be informed.
The new Income Tax Act, 2025 is not a hidden tax grab. It is a genuine simplification exercise — India’s tax law was genuinely unreadable, and the government has made a sincere attempt to make it better. The core principles of taxation remain the same: you pay based on your income, you get deductions for savings and insurance, and you file a return every year.
What will feel different is the form numbers, section references, and the terminology. The ‘Assessment Year’ disappears. Form 16 becomes Form 130. Form 15G/15H become Form 121. TDS sections change from the 192/194 series to the 392/393 series.
For most salaried employees and retirees, the practical impact in 2026 is minimal — your employer and bank will handle most of the transition. The one action most ordinary taxpayers need to take right now is: if you are a senior citizen or retiree with FD interest, submit Form 121 to your bank this month.
This is the most significant structural reform of Indian direct tax law in 65 years. It does not change how much you pay. But it changes how clearly you understand what you are paying, and why. That is a step in the right direction.
Frequently Asked Questions on New Income Tax Act 2025
Q1. Will my tax liability increase under the new Income Tax Act 2025?
A. No. The new Act does not impose any new tax. The tax slabs, rates, and most deductions remain exactly as they were. Only the structure, language, and form numbers have changed.
Q2. Do I need to file my July 2026 ITR under the new Act?
A. No. The ITR you file in July 2026 for FY 2025-26 is still under the old Income Tax Act, 1961. The new Act will first apply to your ITR for Tax Year 2026-27, which you will file in July 2027.
Q3. What is Form 121 and do I need to submit it?
A. Form 121 replaces Forms 15G and 15H from April 1, 2026. If your total income is below the taxable threshold and you want to prevent your bank from deducting TDS on your FD interest, dividend, or rent income, you must submit Form 121 to each payer before the first credit.
Q4. My employer gave me Form 16 in June. Is that the new Form 130?
A. No. Form 16 issued in June 2026 for FY 2025-26 is still the correct old form under the 1961 Act. Form 130 will only be issued from June 2027 onwards, for Tax Year 2026-27.
Q5. Does the Assessment Year concept still exist?
A. For years before April 1, 2026, yes. Pending proceedings and old assessments still reference Assessment Year. But for income earned from April 1, 2026 onwards, the concept of Tax Year applies, and Assessment Year is no longer used.
Q6. My city is Bengaluru. Has my HRA benefit changed?
A. Yes. Bengaluru, Hyderabad, Pune, and Ahmedabad have been added to the list of cities qualifying for 50% HRA exemption (previously only Delhi, Mumbai, Kolkata, Chennai). If you live in any of these cities and pay rent, inform your employer’s payroll team to update your HRA computation.
Q7. Is the old Section 80C deduction still available?
A. Yes. The deduction for eligible investments up to Rs.1.5 lakh per year continues under the new Act, renumbered to Section 123. The underlying benefit — claiming PPF, ELSS, EPF, and other eligible investments — is completely unchanged.
Q8. I am self-employed. Which TDS sections do I use from April 2026?
A. Section 393 under the new Act covers all non-salary TDS (replacing 194C for contractors, 194J for professionals, 194I for rent, and all other 194-series sections). Use new section codes in all TDS returns for payments made from April 1, 2026 onwards. Filing a TDS return with old section codes for April 2026 transactions will generate portal validation errors.
