India's income tax framework has been governed by the Income-tax Act, 2025 since it came into force on 1 April 2026, replacing the Income-tax Act, 1961 -- the substantive rules on residency, deductions, and tax computation are intended to carry forward largely unchanged, but renumbered, so specific section citations should be checked against the new Act rather than the old one.
A new Income-tax Act -- effective 1 April 2026
The Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961, in a
simplification exercise similar in scale to how the BNS replaced the IPC in criminal law -- extensive
renumbering and streamlining of provisions, with the government stating an intent to preserve the substance of
most rules (residency tests, exemptions, deductions, TDS/TCS mechanics, capital gains treatment) while
restructuring the Act’s organization and terminology. The 1961 Act continues to govern assessments and
proceedings for earlier years through transition/savings provisions. Because specific section numbers have
shifted, any citation to a specific section should be verified against the new Act’s text or the CBDT’s
official transition guidance rather than assumed to match the old 1961 Act numbering.
New tax regime versus old tax regime
India has run a dual income-tax regime system for individuals since 2020 -- a default “new tax
regime” with lower slab rates but most exemptions and deductions (such as the Section 80C investment
deduction, HRA, and LTA under the old numbering) foregone, and an optional “old tax regime” with
higher slab rates but full access to those exemptions and deductions. Individuals and HUFs can generally choose
between the two each year, subject to specific conditions for those with business income. Recent budgets have
made the new regime progressively more attractive by raising the effective nil-tax threshold, though the exact
current-year slab rates and rebate thresholds change with each year’s Finance Act and should be checked
against the latest CBDT notification rather than assumed static.
What this means practically for NRIs and returning residents
Because the new Act is described as carrying forward the substance of residency, deduction, and
computation rules while renumbering them, the practical planning considerations that mattered under the 1961
Act -- residency status, choice of tax regime, and applicable deductions -- remain the right questions to ask;
what has changed is where in the statute the answer is found. Anyone relying on older content that cites 1961
Act section numbers should treat those citations as needing to be re-verified against the 2025 Act.
Does the old Income-tax Act, 1961 still apply to anything after 1 April 2026?
Yes, in a limited sense -- the 1961 Act continues to govern assessments and proceedings relating to earlier
tax years through transition and savings provisions, even though the Income-tax Act, 2025 is now the governing
law for tax years from 1 April 2026 onward.
Can I still choose between the old and new tax regimes under the new Act?
The dual-regime structure -- a default new regime with lower rates but fewer exemptions, and an optional old
regime with higher rates but more deductions -- is understood to carry forward into the new Act’s
framework, though the exact current-year rates, thresholds, and any procedural changes for choosing between them
should be confirmed against the latest Finance Act and CBDT guidance.
If a website or advisor cites a 1961 Act section number, is that still accurate?
Not necessarily -- since the Income-tax Act, 2025 substantially renumbered the statute, a citation to a
specific 1961 Act section number should be treated as needing to be re-verified against the new Act’s
corresponding provision, even if the underlying rule itself is largely unchanged in substance.
