The story
The Income Tax Act 1961 was repealed on 1 April 2026 and replaced by the Income Tax Act 2025. Tax rates unchanged. Section numbers changed. The income tax portal now has two tabs. Wrong tab in July 2026 = defective return.
Sunita runs a trading company in Gurugram. When her CA forwarded an April article saying the 2025 Act had replaced the 1961 Act, she read the headline, assumed it meant higher taxes, and scrolled past. It did not mean higher taxes — her rates, deductions and July 2026 ITR calculate identically to last year.
But when she opens the portal in July 2026 she will see something new: two separate tabs. Tab 1: Income Tax Act 1961. Tab 2: Income Tax Act 2025. Click the wrong one and the return is treated as defective.
Why this is causing confusion right now
For 63 years, every taxpayer, CA, accountant and payroll system operated inside one framework: the Income Tax Act 1961. Every TDS section, form number, deduction reference and court citation pointed back to it. On 1 April 2026 that Act was repealed and replaced by the Act of 2025, and the Income Tax Rules 1962 were simultaneously replaced by the Rules of 2026.
Most business owners are walking into the July 2026 filing season without knowing there was a reprint.
What actually changed — and what did not
The Income Tax Department’s own FAQ confirms the 2025 Act imposes no new tax; the intent is readability, ease of understanding and compliance.
What stayed exactly the same: tax slabs and rates under both regimes; all major deductions (Section 80C is now Section 123 — same deduction, new number); the five heads of income; the new regime as default; and the ₹12 lakh zero-tax limit.
| Old (1961 Act) | New (2025 Act) | Practical impact |
|---|---|---|
| 819 sections + 65 years of amendments | 536 clean sections across 23 chapters | Every section reference in software, forms and notices changes |
| Previous Year + Assessment Year | Single Tax Year (April–March) | TY 2026-27 = income earned Apr 2026–Mar 2027, filed by 31 July 2027 |
| 37+ TDS sections (194C, 194J, 192…) | 3 sections: 392 (salary), 393 (non-salary), 394 (TCS) | Challans/certificates must use new numbers for TY 2026-27 |
| Form 3CA / 3CB / 3CD | Single Form 26 | New form applies from TY 2026-27 audit filings |
| Form 15G / 15H | Single Form 121 | Banks must update — old forms not valid after 1 April 2026 |
| Updated-return window: 24 months | Extended to 48 months from end of tax year | Longer window, but penalty 25–60% depending on delay |
Sunita vs Aman — same filing, different results
Both filed in July 2026. The difference is not tax knowledge — it is transition knowledge, knowing which year is governed by which law.
- CA read about the transition in March
- Filed FY 2025-26 on Tab 1 (1961 Act) with correct old section refs
- TDS certificates referenced old numbers — correct for pre-April transactions
- Return processed cleanly
- Accountant filed FY 2025-26 income in a TY 2026-27 structure
- Portal flagged a mismatch — defective under Section 139(9)
- Rectified and resubmitted under Tab 1, no penalty
- Extra fees + a 6-week refund delay
How to actually start — 5 things before July 2026
- Confirm which portal tab your CA is using. For FY 2025-26 income (AY 2026-27), filed in July 2026, your CA must use Tab 1 (1961 Act). If the software defaulted to Tab 2, the return is prepared against the wrong framework. Ask explicitly before filing begins.
- Verify your FY 2025-26 TDS certificates use the old section numbers. Pre-April-2026 transactions should reference 194C, 194J, 192, etc. If a deductor already switched to new numbers for those transactions, the certificate may be defective — raise it during the Form 26AS reconciliation.
- Update accounting and payroll software before the first TY 2026-27 TDS filing. From 1 April 2026, salary TDS = Section 392, non-salary = Section 393, TCS = Section 394. Un-updated software will cite incorrect sections on your Q1 challans — check the update status this week.
- Brief your bank about the new Form 121. Forms 15G/15H are replaced by a single Form 121 under the 2026 Rules. If your bank still issues 15G/15H for post-April transactions, they’re no longer valid — raise it if you rely on TDS-exemption declarations.
- Check your ITR-U position. The updated-return window for FY 2020-21 permanently closed from 1 April 2026. If you have pending ITR-U for FY 2021-22 or FY 2022-23, file now — penalty rates rose from 1 April and now run 25–60% depending on delay.
The Income Tax Act has a new name. The traps for filers are also new. Make sure your July 2026 filing accounts for both.
Key takeaways
| Key compliance point | What you must do |
|---|---|
| July 2026 ITR for FY 2025-26 is STILL under the 1961 Act | Confirm your CA is filing on Tab 1 (1961 Act), not Tab 2 (2025 Act) |
| TDS section numbers changed for post-April-2026 transactions | Update software — salary = Sec 392, other TDS = Sec 393, TCS = Sec 394 |
| Forms 15G/15H replaced by Form 121 from TY 2026-27 | Brief your bank — old forms invalid for post-April-2026 transactions |
| Updated-return window for FY 2020-21 permanently closed | File any pending ITR-U for FY 2021-22 / 2022-23 immediately — penalty rates have risen |
But here is the other side…
The Income Tax Act 2025 is genuinely simpler for most taxpayers, not more complicated. Consolidating 37+ TDS sections into three is a real simplification for businesses with multiple vendor-payment types. The single Tax Year concept removes the decades-old Previous Year / Assessment Year confusion. The extended 48-month updated-return window gives more time to correct past filings. And the plain-language drafting was explicitly designed to reduce dependence on professionals for routine questions over time. The transition disruption is real but temporary; the long-term direction is a simpler system.
The law changed — your July filing has not
The Act went live 32 days ago, but for the return you file in July 2026 nothing changes: same income, same deductions, same portal login — just Tab 1, not Tab 2. The confusion this season won’t come from tax calculations; it will come from accountants, software and forms that haven’t been updated. The best protection is a simple conversation with your CA: which tab, which sections, which forms — for FY 2025-26 versus TY 2026-27.
WeConsult India assists businesses across Gurugram’s Sector 82, Sector 84 and the Cyber Hub corridor with FY 2025-26 income tax return preparation, TDS compliance transition under ITA 2025, and ITR-U filings before penalty escalations take effect.
Stay compliant. Stay protected. — WeConsult India