The Income Tax Act, 2025 has replaced the 1961 Act with effect from 1 April 2026. This article explains the new concept of Tax Year, the applicable income tax slabs under the default regime for Tax Year 2026-27, return filing provisions under Section 263, and what every taxpayer must know for the transition year.
The Income Tax Act, 2025 — A New Era
The Income Tax Act, 2025 received the President’s assent and came into force on 1 April 2026, completely replacing the Income Tax Act, 1961. The new Act was further amended by the Finance Act, 2026, which prescribes the tax rates applicable to Tax Year 2026-27. All income earned from 1 April 2026 onwards is governed by the 2025 Act. Proceedings relating to years prior to April 1, 2026 continue to be governed by the 1961 Act, as preserved by the transitional provisions.
‘Tax Year’ — The New Terminology
One of the most significant conceptual changes in the Income Tax Act, 2025 is the replacement of the “Previous Year” and “Assessment Year” framework with a single concept — the Tax Year. A Tax Year is a twelve-month financial period (April 1 to March 31) in which income is earned and assessed. The first Tax Year under the new Act is Tax Year 2026-27 (1 April 2026 to 31 March 2027). There is no separate “Assessment Year” terminology under the new Act.
Author Note: Tax Year 2026-27 = Previous Year 2026-27 = the year for which returns will be filed by July/October 2027.
Income Tax Slabs — Default Regime for Tax Year 2026-27
The default regime under the Income Tax Act, 2025 (as amended by Finance Act, 2026) continues the simplified slab structure. The following rates apply to individual taxpayers for Tax Year 2026-27:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
A surcharge and Health & Education Cess of 4% apply as per the provisions of the Finance Act, 2026.
Rebate Provision — Nil Tax Threshold
The rebate provision (equivalent to the former Section 87A of the 1961 Act) continues under the Income Tax Act, 2025. Individual taxpayers with total income up to ₹12,00,000 under the default regime are eligible for a full rebate, resulting in nil tax liability. For salaried individuals, after factoring the standard deduction of ₹75,000, the effective nil tax threshold is ₹12,75,000.
Standard Deduction
A standard deduction of ₹75,000 continues to be available to salaried employees and pensioners under the default regime of the Income Tax Act, 2025.
Return Filing — Section 263 of the Income Tax Act, 2025
Under the Income Tax Act, 2025, all provisions relating to the filing of returns of income are unified under Section 263. Section 263 consolidates the rules for original returns (sub-section 1), belated returns (sub-section 4), revised returns (sub-section 5), and updated returns (sub-section 6).
Due dates under Section 263(1) for Tax Year 2026-27 (returns due in 2027):
| Category of Taxpayer | Due Date |
|---|---|
| Individuals and other non-audit cases | 31st July, 2027 |
| Non-audit business/profession (Section 172 not applicable) | 31st August, 2027 |
| Companies and audit cases (Section 172 not applicable) | 31st October, 2027 |
| Transfer Pricing cases (Section 172 applicable) | 30th November, 2027 |
ITR Forms under Income Tax Rules, 2026
New ITR forms applicable for Tax Year 2026-27 will be prescribed under the Income Tax Rules, 2026 (which replace the Income Tax Rules, 1962). These forms will be notified on the e-filing portal well before the respective due dates. For AY 2026-27 (income of FY 2025-26), the old ITR forms (ITR-1 to ITR-7) under the 1961 Act continue to apply, due by July/October 2026.
Transition Year — Key Compliance Points
Taxpayers must navigate two parallel compliance frameworks during the transition year:
- AY 2026-27 (income of FY 2025-26): Governed by the Income Tax Act, 1961. Use old ITR forms. Returns are due in July/October 2026.
- Tax Year 2026-27 (income of FY 2026-27): Governed by the Income Tax Act, 2025. New ITR forms under Rules 2026. Returns are due in July/October 2027.
- Self-assessment tax for AY 2026-27 paid after April 1, 2026 continues to be governed by Section 140A of the 1961 Act.
- Advance tax for Tax Year 2026-27 (first instalment due June 15, 2026) is governed by the provisions of the Income Tax Act, 2025.
The information provided herein is for general guidance and informational purposes only. For advice tailored to your specific situation, please consult a qualified Chartered Accountant.
The information provided herein is for general guidance and informational purposes only. For advice tailored to your specific situation, please consult a qualified Chartered Accountant.