The Income-tax Act, 2025 comes into force. What actually changes from April 1

For six decades Indian direct tax ran on one statute, which the Finance Minister described in 2025 as a maze created by more than 4,000 amendments. From April 1, 2026 that statute is repealed. The Income-tax Act, 2025, passed by Parliament on August 12, 2025 and signed by the President on August 21, 2025, is now the operative direct tax law of the country.

Rules first, statute second

The sequencing is unusual and matters for anyone filing this year. The Central Board of Direct Taxes notified the Income-tax Rules, 2026 on March 20, 2026 to operationalise the new Act, and notified the corresponding forms alongside them. The point of the exercise, the department said, was simplification without a change in tax policy: the substance of what is taxed is meant to be the same, expressed in plainer language.

• A single 'tax year' replaces the older pair of a previous year and an assessment year. It runs from April to March, and income earned in it is taxed in the following year.
• Monetary thresholds for quoting a PAN when buying motor vehicles or making cash deposits and withdrawals were raised.
• The valuation of company-supplied perquisites, including the house expenditure allowance, was revised.
• Stock exchanges are to keep audit trails for seven years, prevent deletion of transaction records and file monthly reports on modified transactions.

Those are the changes the rules reach directly. A wider set of forms covering quarterly TDS and TCS reporting, audit reports, PAN and TAN applications, foreign remittances and provisional registration of non-profit organisations was also reworked, which means much of the first-year friction for a business or a salaried taxpayer will be administrative rather than arithmetical.

That carve-out is the practical answer to the question most taxpayers ask, which is whether a return already filed or an appeal already pending has been invalidated. It has not. Section 536(2)(c) provides that the repealed Act continues to govern notices, assessment, reassessment, penalty, reference, revision and appeal proceedings for tax years that began before April 1, 2026, including proceedings started after that date. The department's e-filing portal is expected to run under both statutes concurrently so that filings made on either basis are accepted. The formal position is therefore settled; the open question is operational, namely how quickly the simplified rules settle into practice now that taxpayers had the notification window to acquaint themselves with them.