Act 2025 Explained

Tax Year — One Name for One Concept

The Income Tax Act 2025 replaced two old terms with one: 'tax year'. Here is what that means, how the dates work, and why the old terms are gone.

The old Income Tax Act used two terms for the time periods involved in taxation. The new Income Tax Act 2025 replaces them with one clear word: tax year.

If you filed ITR under the old Act, you may have been confused by 'previous year' and 'assessment year'. The new Act clears this up. The tax year is the 12 months in which you earn your income — for tax year 2026-27, that is 1 April 2026 to 31 March 2027.

What changed

One name replaces two

The old Act used two terms — 'previous year' (the year you earned income) and 'assessment year' (the year you paid tax on it). The new Act replaces both with one term: 'tax year'.

Tax year = the year your income is counted

For tax year 2026-27, the 12 months from 1 April 2026 to 31 March 2027 are your tax year. All income earned in that period is taxed in that year's return.

One return per tax year

You file one ITR for each tax year. The ITR you file in 2027 is for tax year 2026-27. The deadline is generally 31 July of the assessment year.

Assessment year renamed

Under the new Act, the year after the tax year is no longer called the 'assessment year'. The return-filing process stays the same; only the name changes.

How the tax year works

1 April 2026 — tax year 2026-27 begins

Your income is counted from this date onwards.

During the tax year (April 2026 – March 2027)

Your employer deducts TDS each month based on your declared investments and the applicable regime.

31 March 2027 — tax year 2026-27 ends

All income for this period is finalised.

31 July 2027 — ITR deadline

File your ITR for tax year 2026-27 by this date (standard non-audit deadline).

Frequently asked questions

What was the 'previous year' under the old Income Tax Act?

The 'previous year' was the 12-month period in which your income was earned. For most salaried individuals, it ran from 1 April to 31 March. The new Act keeps this same period but calls it the 'tax year'.

What was the 'assessment year'?

The assessment year was the financial year after the previous year — the year in which you filed your return and paid any tax due. The new Act uses 'tax year' for the income period and keeps the filing process unchanged.

Does the tax year run from January to December?

No. For India's income tax purposes, the tax year runs from 1 April to 31 March. This aligns with the government's financial year (1 April to 31 March). If you are a salaried employee, your employer deducts TDS based on this same period.

Where does the Income Tax Act 2025 explain the tax year?

The Income Tax Department's new-act guidance at incometax.gov.in explains the tax year in plain English. The Act text itself uses 'tax year' consistently throughout to mean the period from 1 April to 31 March.

Sources: Income Tax Act 2025 · Income Tax Department new-act guidance (verified 2026-10-07). Last reviewed by FinWiz24 Research Desk.

Introduction