<p>In another two days, India’s new income tax legislation, the Income Tax Act, 2025, along with the Income Tax Rules, 2026, will come into force. The new era will impact every taxpayer, whether self-employed, salaried individual, professional, or corporate. </p>.<p><strong>Only tax year, no more confusion</strong></p>.<p>One of the key changes is that it replaces the terms ‘Previous Year (PY)’ and ‘Assessment Year (AY)’ with a unified single term ‘Tax Year (TY)’. A ‘TY’ is a period of 12 months commencing from April 1 and ending on March 31 of the following year. In certain cases, there may be fewer than 12 months. For instance, if it is a newly set-up business/a new source of income occurred in January 2026, they will have just three months of the TY and subsequently, full 12 months of the TY. The first TY 2026-27 will start from April 1, 2026, and end on March 31, 2027. This major change will simplify compliance, remove confusion in the minds of taxpayers in differentiating PY and AY, and help in the correct remittance of self-assessment and advance taxes. </p>.<p>The term ‘TY’ is widely used in other tax jurisdictions. Are there any clashes of ‘AY’ and ‘TY’? No. The reasons are — For the FY2025-26, the AY will be 2026-27 and governed by the 1961 Act and Rules issued thereunder, i.e. income earned during FY2025-26 shall be computed as per old provisions. The income earned during the first TY 2026-27 will be governed by the 2025 Act and Rules issued thereunder. Further, the 2025 Act has retained the term ‘FY’ for computation, compliance timelines, and other procedural aspects.</p>.<p><strong>Income tax regimes</strong></p>.<p>Both the default new tax and the optional old tax regimes will be available for the taxpayers with certain amendments brought by the Union Budget 2026-27 presented on February 1, 2026. With respect to tax slabs under the default new regime are – Income up to Rs 4 lakh – nil, Rs 4 lakh to Rs 8 lakh – 5%, Rs 8 lakh to Rs 12 lakh – 10%, Rs 12 lakh to Rs 16 lakh – 15%, Rs 16 lakh to Rs 20 lakh – 20%, Rs 20 lakh to Rs 24 lakh – 25%, and above Rs 24 lakh – 30%, plus applicable cess and surcharge.</p>.<p>The tax slabs under the optional old regime applicable for individuals and senior citizens are up to Rs 2.5 lakh – nil, Rs 2.5 lakh to Rs 5 lakh – 5%, Rs 5 lakh to Rs 10 lakh 20%, and above Rs 10 lakh – 30%.</p>.<p>In the case of a super senior citizen, up to Rs 5 lakh – nil, Rs 5 lakh to Rs 10 lakh – 20%, and above Rs 10 lakh – 30%, plus applicable cess and surcharge.</p>.<p><strong>Deductions and allowances</strong></p>.<p>A salaried taxpayer or pensioner who opts for the default new tax regime <br>is eligible for a standard deduction of Rs 75,000. A resident individual can avail a rebate of up to Rs 60,000, whose annual taxable income does not exceed Rs 12 lakh. And those taxpayers opting optional old regime are also eligible for a standard deduction of Rs 50,000. A resident individual can avail a rebate of up to Rs 12,500, whose annual taxable income does not exceed Rs 5 lakh. </p>.<p>Apart from these, there are deductions, allowances and tax-free perquisites, to name a few, employer’s contribution to NPS, family pension, interest on home loan, children’s education allowance, meal vouchers, car, gifts, leave travel and transport allowance, among others. Since the old optional regime’s continuation is assured for a few more years, this is the right time to take an appropriate call on whichever regime is suitable for him/her.</p>.<p><strong>ITR filing due dates</strong></p>.<p>The Union Budget 2026-27 has made a slight change to the return filing due dates. Due dates applicable for AY 2026-27 are – In the case of salaried individuals, filing ITR 1/2 remains the same as July 31, 2026. In the case of non-audit businesses and professionals, filing ITR 3/4 – August 31, 2026 (till last year – July 31). </p>.<p>For filing a belated return – December 31, 2026; revised return – March 31, 2027 (till last year – December 31); and updated return for FY2025-26/AY 2026-27 – March 31, 2031. Now, a taxpayer is allowed to update his/her return even after reassessment proceedings have been initiated. By filing an updated return with applicable additional tax over and above, he /she can avoid protracted litigation. </p>.<p><strong>Transitional issues</strong></p>.<p>During this transition period, there are possibilities of overlapping of old and new Rules and also parallel running of two legislations for a couple of years. For interpretation purposes, a TY commencing on or before April 1, 2025, will be deemed to be PY. There will be no repeal effect on the operations carried out before March 31, 2026.</p><p>The 2025 Act will not affect any right, privilege, obligation, or liability that occurred before March 31, 2026. The proceedings initiated on or after April 1, 2026, in respect of any TY before April 1, 2026, will be carried out as per the repealed provisions. All proceedings pending as of April 1, 2026, before any I-T authorities shall continue and dispose accordingly.</p>
<p>In another two days, India’s new income tax legislation, the Income Tax Act, 2025, along with the Income Tax Rules, 2026, will come into force. The new era will impact every taxpayer, whether self-employed, salaried individual, professional, or corporate. </p>.<p><strong>Only tax year, no more confusion</strong></p>.<p>One of the key changes is that it replaces the terms ‘Previous Year (PY)’ and ‘Assessment Year (AY)’ with a unified single term ‘Tax Year (TY)’. A ‘TY’ is a period of 12 months commencing from April 1 and ending on March 31 of the following year. In certain cases, there may be fewer than 12 months. For instance, if it is a newly set-up business/a new source of income occurred in January 2026, they will have just three months of the TY and subsequently, full 12 months of the TY. The first TY 2026-27 will start from April 1, 2026, and end on March 31, 2027. This major change will simplify compliance, remove confusion in the minds of taxpayers in differentiating PY and AY, and help in the correct remittance of self-assessment and advance taxes. </p>.<p>The term ‘TY’ is widely used in other tax jurisdictions. Are there any clashes of ‘AY’ and ‘TY’? No. The reasons are — For the FY2025-26, the AY will be 2026-27 and governed by the 1961 Act and Rules issued thereunder, i.e. income earned during FY2025-26 shall be computed as per old provisions. The income earned during the first TY 2026-27 will be governed by the 2025 Act and Rules issued thereunder. Further, the 2025 Act has retained the term ‘FY’ for computation, compliance timelines, and other procedural aspects.</p>.<p><strong>Income tax regimes</strong></p>.<p>Both the default new tax and the optional old tax regimes will be available for the taxpayers with certain amendments brought by the Union Budget 2026-27 presented on February 1, 2026. With respect to tax slabs under the default new regime are – Income up to Rs 4 lakh – nil, Rs 4 lakh to Rs 8 lakh – 5%, Rs 8 lakh to Rs 12 lakh – 10%, Rs 12 lakh to Rs 16 lakh – 15%, Rs 16 lakh to Rs 20 lakh – 20%, Rs 20 lakh to Rs 24 lakh – 25%, and above Rs 24 lakh – 30%, plus applicable cess and surcharge.</p>.<p>The tax slabs under the optional old regime applicable for individuals and senior citizens are up to Rs 2.5 lakh – nil, Rs 2.5 lakh to Rs 5 lakh – 5%, Rs 5 lakh to Rs 10 lakh 20%, and above Rs 10 lakh – 30%.</p>.<p>In the case of a super senior citizen, up to Rs 5 lakh – nil, Rs 5 lakh to Rs 10 lakh – 20%, and above Rs 10 lakh – 30%, plus applicable cess and surcharge.</p>.<p><strong>Deductions and allowances</strong></p>.<p>A salaried taxpayer or pensioner who opts for the default new tax regime <br>is eligible for a standard deduction of Rs 75,000. A resident individual can avail a rebate of up to Rs 60,000, whose annual taxable income does not exceed Rs 12 lakh. And those taxpayers opting optional old regime are also eligible for a standard deduction of Rs 50,000. A resident individual can avail a rebate of up to Rs 12,500, whose annual taxable income does not exceed Rs 5 lakh. </p>.<p>Apart from these, there are deductions, allowances and tax-free perquisites, to name a few, employer’s contribution to NPS, family pension, interest on home loan, children’s education allowance, meal vouchers, car, gifts, leave travel and transport allowance, among others. Since the old optional regime’s continuation is assured for a few more years, this is the right time to take an appropriate call on whichever regime is suitable for him/her.</p>.<p><strong>ITR filing due dates</strong></p>.<p>The Union Budget 2026-27 has made a slight change to the return filing due dates. Due dates applicable for AY 2026-27 are – In the case of salaried individuals, filing ITR 1/2 remains the same as July 31, 2026. In the case of non-audit businesses and professionals, filing ITR 3/4 – August 31, 2026 (till last year – July 31). </p>.<p>For filing a belated return – December 31, 2026; revised return – March 31, 2027 (till last year – December 31); and updated return for FY2025-26/AY 2026-27 – March 31, 2031. Now, a taxpayer is allowed to update his/her return even after reassessment proceedings have been initiated. By filing an updated return with applicable additional tax over and above, he /she can avoid protracted litigation. </p>.<p><strong>Transitional issues</strong></p>.<p>During this transition period, there are possibilities of overlapping of old and new Rules and also parallel running of two legislations for a couple of years. For interpretation purposes, a TY commencing on or before April 1, 2025, will be deemed to be PY. There will be no repeal effect on the operations carried out before March 31, 2026.</p><p>The 2025 Act will not affect any right, privilege, obligation, or liability that occurred before March 31, 2026. The proceedings initiated on or after April 1, 2026, in respect of any TY before April 1, 2026, will be carried out as per the repealed provisions. All proceedings pending as of April 1, 2026, before any I-T authorities shall continue and dispose accordingly.</p>