Transition of Income Tax Act 1961 into Income Tax Act 2025 – Key Changes

CA Ketan Mehta 10 Apr 2026 1,620 Views 0 comment Print Income Tax | Articles

Background

The Income Tax Act 2025 (ITA 2025) has been implemented from 1^st April 2026, to streamline, simplify the tax provisions. The Income Tax Act 1961 (ITA 1961) is repeal but few transition provisions will continue to refer the old act for its smooth transition. The new act has reduced the cross references, consolidated provisions, use simpler language and classification of section & rules has reduced by 35% as compare to old Act.

Changing the tax period terminology to “Tax Year”

Earlier under Income Tax Act 1961 the year was referred as “Previous Year” (PY) and “Assessment year” (AY).

“Previous Year” is 1^st April 2026 to 31^st March 2027

“Assessment Year” is 1^st April 2027 to 31^st March 2028

The new Income Tax Act 2025 has now removed the confusion and now introduced a concept of “Tax Year” 1^st April 2026 to 31^st March 2027. So, it removed the use of two terms “Previous Year” & “Assessment year” used to indicate only one period and removed the dual year references. From 1^st April 2026 to 31^st March 2027, the year will be described as “Tax Year”.

Continuity of exiting framework

Existing PAN, TAN will continue under ITA 2025.
Rights, liabilities, obligations and benefits arose under ITA 1961 will continue under ITA 2025.
Approvals provided under IAT 1961 will continue under ITA 2025.
Old Circulars, notifications, instruction will remain valid as long as they do not conflict with ITA 2025.
TDS, Advance Tax, Self-Assessment Tax and regular assessment tax will continue under ITA 2025.
Tax payment modes will remain unchanged.

TDS Considerations

The TDS obligations shall continue to be governed by the act applicable to the financial year in which the sum is paid or credited. If any event either payment of credit happens before 31^st March then it will be governed by ITA 1961.

Sr No	Scenario	Applicable Act
A)	Sum Paid or Credited on or before 31^st March 2026	ITA 1961
B)	Sum Paid or Credited on or after 1^st April 2026	ITA 2025

For transactions entered before 31^st March 2026 Sections as per ITA 1961 are applicable and for transactions entered on or after 1^st April 2026 section as per ITA 2025 are applicable for TDS reporting.
There is no change in interest rates for TDS late payment or late deduction.

TDS Returns filing form

The form used for TDS return filing are now changed and details are as per below table –

Sr No	Particulars	ITA 1961	ITA 2025
1	Salary TDS Return	Form 24Q	Form 138
2	Non-Salary TDS Return	Form 26Q	Form 140
3	Foreign Payment TDS Return	Form 27Q	Form 144
4	TCS Return	Form 27EQ	Form 143
5	TDS on Sale of Property	Form 26QB	Form 141
6	TDS on Rent of Property	Form 26QC
7	TDS on Payment to contractor professional by Individuals	Form 26 QD
8	TDS on Transfer of Virtual Digital Asset	Form 26 QE

Income Tax Return Due Dates

There is no change in the due dates as per the ITA 2025, however the Budget introduced a new due date for assessee having Business Income & not required audit under the Act –

Sr No	Particulars	ITA 1961	ITA 2025
1	Transfer Pricing Audit Applicable	30^th November	30^th November
2	Tax Audit Applicable/Companies & LLPs with Statutory Audits	31^st October	31^st October
3	Others with Business Income	31^st August	31^st August
4	Others	31^St July	31^St July

Forms under ITA 1961 and ITA 2025

The new ITA 2025 has introduced all the forms with new numbering. Below are the changes in the form numbers under ITA 2025 as compared to ITA 1961.

Sr No	Particulars	ITA 1961	ITA 2025
1	PAN application – Indian Individual	Form 49A	Form 93
2	PAN application – Indian Entity	Form 49A	Form 94
3	PAN application – Foreign Individual	Form 49AA	Form 95
4	PAN application – Foreign Entity	Form 49AA	Form 96
5	TAN Application – Government	Form 49B	Form 134
6	TAN Application – Non – Government	Form 49B	Form 135
7	Declaration where PAN not available	Form 60	Form 97
8	Lower/nil withholding certificate	Form 13	Form 128
9	Self-declaration for no TDS (below 60 yrs)	Form 15G	Form 121
10	Self-declaration for no TDS (60 yrs and above)	Form 15H	Form 121
11	Relief for salary arrears	Form 10E	Form 39
12	Foreign remittance information	Form 15CA	Form 145
13	CA certificate for foreign remittance	Form 15CB	Form 146
14	Tax audit report (audited under other law)	Form 3CA	Form 26
15	Tax audit report (others)	Form 3CB	Form 26
16	Statement of particulars (audit)	Form 3CD	Form 26
17	Information to be provided under section 159(8)	Form 10F	Form 41
18	Application for Certificate of residence	Form 10FA	Form 42
19	Certificate of residence for the purposes of section 159	Form 10FB	Form 43
20	Information by Constituent Entity	Form 3CEAA	Form 56
21	Intimation by a designated constituent entity section 171(4)	Form 3CEAB	Form 57
22	Intimation by a constituent entity Section 511(1)	Form 3CEAC	Form 58
23	Report by a parent entity or an alternate reporting entity	Form 3CEAD	Form 59
24	Intimation on behalf of the international group for the purposes of section 511(5)	Form 3CEAE	From 60

TDS deduction section changes

Below are the changes in TDS Section as per new ITA 2025 –

Sr No	Particulars	ITA 1961	ITA 2025
1	Salary & Accumulated Balance	192 & 192A	392
2	All TDS Deductions	193 to 197A	393
3	All TCS Deductions	206C	394

TDS payment code changes

Below are the changes for the purpose of TDS payment (regularly used payments) –

Sr No	Particulars	ITA 1961	ITA 2025
1	Payment to employees	192	392-1002
2	PF accumulated balance	192A	392-1004
3	Commission / brokerage – Others	194H	393-1006
4	Rent – machinery etc.	194I	393-1008
5	Rent – other	194I	393-1009
6	Any Income by way of Interest other than interest on Securities in case of deductee/payee is a senior citizen	194A	393-1020
7	Any Income by way of Interest other than interest on Securities in case of deductee/payee is other than senior citizen	194A	393-1021
8	Any income being interest other than interest on securities	194A(1)	393(1)-1022
9	Contract – Individual/HUF	194C	393(1)-1023
10	Contract – Others	194C	393(1)-1024
11	Technical services / royalty / call center	194J	393(1)-1026
12	Professional services	194J	393(1)-1027
13	Director remuneration	194J	393(1)-1028
14	Dividend	194	393(1)-1029
15	Purchase of goods	194Q	393(1)-1031
16	Sale of scrap	206C	394(1)-1073
17	Foreign Payments	195	393(2)-1039 to 393(2)-1057
18	Any sum in the nature of salary, remuneration, commission, bonus or interest paid to a partner (Including to his capital account)	194T	393(3)-1067

Important changes in section numbering & regrouping as per Income Tax Act 2025

Related to income from salary and TDS on salary income

Sr No	Income Tax Act 1961		Income Tax Act 2025
Sr No	Section Number	Section Name	Section Number	Section Name
1	15	Salaries	15	Salaries
2	17	“Salary”, “perquisite” and “profits in lieu of salary” defined	16	Income from Salary
			17	Perquisite
			18	Profits in lieu of salary
3	192	Salary	392	Salary and accumulated balance due to an employee
4	192 A	Payment of accumulated balance due to an employee	392	Salary and accumulated balance due to an employee
5	10(6)(viii)	Any income chargeable under the head “Salaries”, received or due as remuneration for services rendered in connection with his employment on a foreign ship	Schedule IV(4)	Any income chargeable under the head “Salaries”, received or due as remuneration for services rendered in connection with his employment on a foreign ship
6	16	Deductions from salaries	19	Deductions from salaries
7	10(10)	Gratuity
8	10(10A)	Pension
9	10(10AA)	Leave Salary
10	10(10B)	Retrenchment Compensation
11	10(10C)	Voluntary Retirement Compensation
12	89	Relief when salary, etc., is paid in arrears or in advance	157	Relief when salary, etc., is paid in arrears or in advance
13	NA	Interpretations Section wise/ under each section governing TDS & TCS	402	Interpretations

Few important changes in perquisite valuation norms as per Income Tax Rules 2026

Sr No	Description	Income Tax Act 1961 Rule 3	Income Tax Rules 2026 Rule 15
1	Motor Car – Owned/Hired by Employer, Used Partly for office and partly for Personal	Engine upto 1.6 L – All expenses by employer Rs. 1,800/- All Private expenses by employee Rs. 600/- Engine above 1.6 L – All expenses by employer Rs. 2,400/- All Private expenses by employee Rs. 900/- (Driver in all cases Rs. 900/-)	Engine upto 1.6 L – All expenses by employer Rs. 5,000/- All Private expenses by employee Rs. 2,000/- Engine above 1.6 L – All expenses by employer Rs. 7,000/- All Private expenses by employee Rs. 3,000/- (Driver in all cases Rs. 3,000/-)
2	Loan at concessional rates	Small loans not treated as perquisites were upto Rs. 20,000/-	Small loans not treated as perquisites are Rs. 2,00,000/-
3	Education to Children	No perquisite where fees amount does not exceed Rs. 1,000/- per month	No perquisite where fees amount does not exceed Rs. 3,000/- per month
4	Gift/Voucher	No perquisite where gift amount does not exceed Rs. 5,000/- aggregated yearly.	No perquisite where gift amount does not exceed Rs. 15,000/- aggregated yearly.
5	Free Meal/Vouchers	Exempt upto Rs. 50/- per meal	Exempt upto Rs. 200/- per meal

Few important changes in allowances/ exemptions and deductions as per Income Tax Rules 2026 –

Sr No	Description	Income Tax Act 1961 Rule 3	Income Tax Rules 2026 Rule 15
1	Child Education Allowance	Exemption upto Rs. 100/- per month per child max two.	Exemption upto Rs. 3,000/- per month per child max two.
2	Hostel Allowance	Exemption upto Rs. 300/- per month per child max two.	Exemption upto Rs. 9,000/- per month per child max two.
3	Transport for specially-abled employee	Exemption upto Rs. 3,200/- per month	Metro – Exemption upto Rs. 15,000/- per month Non-Metro – Exemption upto Rs. 8,000/- per month
4	HRA 50% to Metro Cities	Mumbai, Delhi, Chennai and Kolkata	Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Bangaluru, Pune and Ahmedabad