The new Income Tax Act, 2025 — what's actually different

Under the old Act, you earned income in a "Previous Year" and filed it in the following "Assessment Year" — two different years, one confusing habit. The new Act collapses this into a single "Tax Year": the same 1 April–31 March period, one name.

Anything you earned before 1 April 2026 is still governed by the old 1961 Act, filed the old way. Your FY 2025-26 return, filed in 2026, is untouched by any of this.

Worked example — a salaried professional: Say Priya earns ₹12,00,000 a year and claims ₹75,000 standard deduction, ₹1,50,000 under Section 80C, and ₹25,000 under Section 80D. Filing for FY 2025-26 (done in 2026) is governed by the 1961 Act — she claims Sections 80C and 80D exactly as before. Filing for Tax Year 2026-27 (done in 2027) is governed by the 2025 Act: the same deductions exist, worth the same amounts — they're just renumbered. Section 80C becomes Section 123 (read with Schedule XV), and Section 80D becomes Section 126. Her taxable income and tax payable are unchanged; only the section numbers her filing software auto-fills are different.

Worked example — a small business owner: Say Arjun runs a small trading business with an annual turnover of ₹1.8 crore, has never opted into presumptive taxation, and reports actual profit around 4% of turnover — below the 6–8% rate the law treats as a reasonable minimum. Under the old Act, this never triggered a mandatory audit by itself. Under the new Act, Section 63 (successor to Section 44AB) adds a genuinely new trigger: any business eligible for presumptive taxation under Section 58 that declares profit below the deemed rate now requires an audit, whether or not it ever opted into that scheme. From Tax Year 2026-27, Arjun may need an audit he's never needed before — purely because of the profit percentage on his own books.

Section 123, Section 126, and Section 63 are well-corroborated across multiple independent tax-practice sources and align with the Income Tax Department's own section-mapping references. The audit-trigger shift under Section 63 is a newer, more actively-discussed reading of the Act — worth confirming against final CBDT guidance as it's issued.