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Income Tax Act 2025: What Changed for Indian Taxpayers

Renish Mithani's profile photo Renish Mithani
6 min read
Reviewed by Darshil Chauhan Last reviewed 7 October 2026 Data verified 7 October 2026
Income Tax Tax Regime New Tax Act Tax Law

The Income Tax Act 2025 became law on 1 April 2026, replacing the Income Tax Act 1961 that had governed Indian taxation for more than five decades. If you filed a return last year, the new Act does not require you to learn everything from scratch — most of the mechanics you know remain the same. But there are real differences that affect your tax bill.

What changed and what did not

The 2025 Act retains the core structure of the old law: income still falls under five heads (salary, house property, business or profession, capital gains, and other sources), TDS still applies at source, and the self-assessment tax cycle remains unchanged. The government reorganised the sections, simplified some language, and introduced a few new provisions.

What is new under the 2025 Act:

The new regime (section 202) is now the default for every taxpayer. If you want to stay in the old regime, you must actively opt out before filing. The new regime offers lower slab rates but removes most deductions including Section 80C, 80D, HRA, and 80CCD.

The 2025 Act introduced a standard deduction of ₹75,000 for all employees under the new regime (up from ₹75,000 under the old regime for pensioners). The rebate under Section 87A continues — taxpayers with income up to ₹7 lakh get a full rebate and pay zero tax.

What the 2025 Act kept the same:

  • The five income heads and their computation rules
  • TDS rates and thresholds (they remain largely unchanged)
  • Capital gains tax rates
  • The GST regime (GST is a separate Act)

The new regime is now the default

Under Section 202 of the Income Tax Act 2025, the new tax regime applies to every resident individual and HUF unless they have filed Form 10-IE to opt out. This is a shift from earlier years where you had to actively choose the new regime.

Who should still consider the old regime:

If you have a home loan with a large HRA component, predictable medical expenses above ₹75,000, or contributions to ELSS and life insurance premiums, the old regime may work out cheaper. Run both calculations before you file.

Section numbers changed

The 2025 Act has 536 sections compared to the 1961 Act’s roughly 500 sections. The renumbering reflects reorganised chapters rather than new taxes. For example, what was Section 80C is now roughly Section 80C (the exact mapping is published by the Income Tax Department at incometax.gov.in).

The department has published a cross-reference guide on its new portal showing old-to-new section mappings.

How this affects your FY 2026-27 return

The tax year 2026-27 (filed by July 2027) is the first full year under the new Act. Your Form ITR remains largely the same shape, but the computation logic follows the 2025 Act’s section numbers.

Key dates for FY 2026-27:

Event Due date
Financial year 1 April 2026 – 31 March 2027
ITR filing deadline (non-audit) 31 July 2027
ITR filing deadline (with audit) 31 October 2027
Belated return window Until 31 December 2027

Our take

The 2025 Act is a reorganisation, not a revolution. For most salaried taxpayers earning under ₹12 lakh per year, the new regime is likely to result in a lower tax outflow. If you are in the old regime, it is worth running the numbers again this year — the standard deduction increase and the reshuffled slabs may surprise you.

Use the Income Tax Calculator to see which regime gives you a lower tax outgo for FY 2026-27.

Sources

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