The Union Budget 2026-27 confirmed the implementation of the Income Tax Act, 2025 from April 1, 2026, replacing the 63-year-old Income Tax Act, 1961. The new Act received Presidential assent on August 21, 2025. Key changes: the Act consolidates provisions into 536 sections across 23 chapters and 16 schedules (down from 800+ sections and 47 chapters). The confusing 'previous year' and 'assessment year' replaced by the 'Tax Year' concept. However, personal income tax slabs remain unchanged under both old and new tax regimes. New tax regime slabs: ₹0-4 lakh (nil); 4-8 lakh (5%); 8-12 lakh (10%); 12-16 lakh (15%); 16-20 lakh (20%); 20-24 lakh (25%); above 24 lakh (30%). Income up to ₹12.75 lakh effectively tax-free for salaried taxpayers (including ₹75,000 standard deduction).
Budget 2026: Income Tax Act 2025 to Replace 1961 Act from April 1, 2026; No Change in Tax Slabs
Income Tax Act 2025 replaces 1961 Act from April 2026; 536 sections (from 800+); 'Tax Year' replaces assessment year; tax slabs unchanged.
Key facts
- Income Tax Act, 2025 replaces 63-year-old IT Act 1961 from April 1, 2026; received Presidential assent on August 21, 2025
- New Act consolidates into 536 sections across 23 chapters and 16 schedules (down from 800+ sections and 47 chapters)
- Previous year and assessment year concepts replaced by single Tax Year concept
- Personal income tax slabs unchanged; income up to ₹12.75 lakh effectively tax-free for salaried taxpayers
- New regime slabs: 0-4L nil, 4-8L 5%, 8-12L 10%, 12-16L 15%, 16-20L 20%, 20-24L 25%, above 24L 30%
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Which act will the Income Tax Act 2025 replace?
The Income Tax Act, 2025 replaces the Income Tax Act, 1961. The Income Tax Department explains that the 1961 Act stands repealed from 1 April 2026, while transitional provisions continue pending proceedings where required. The new Act reorganises and simplifies the old law but the Act being replaced is the Income Tax Act, 1961.
Source: Business Today
Frequently asked questions
What are the key structural changes in the Income Tax Act 2025 compared to the 1961 Act?
The **Income Tax Act 2025** (effective April 1 2026) consolidates provisions into **536 sections across 23 chapters and 16 schedules**, down from **800+ sections and 47 chapters** in the 1961 Act. The confusing **previous year and assessment year** concepts are replaced by a single **Tax Year** concept. The Act received **Presidential assent on August 21 2025**.
What are the income tax slabs under the new tax regime in Income Tax Act 2025?
New tax regime slabs under the **Income Tax Act 2025**: ₹0-4 lakh **(nil)**; ₹4-8 lakh **(5%)**; ₹8-12 lakh **(10%)**; ₹12-16 lakh **(15%)**; ₹16-20 lakh **(20%)**; ₹20-24 lakh **(25%)**; above ₹24 lakh **(30%)**. For salaried taxpayers, income up to **₹12.75 lakh is effectively tax-free** (including ₹75,000 standard deduction).
Did Budget 2026-27 change income tax slabs with the new Income Tax Act 2025?
**Budget 2026-27 did not change income tax slabs**. The new Income Tax Act 2025 is a **structural simplification** replacing the 1961 Act, not a tax rate revision. Both old and new tax regimes carry the **same tax slabs**. Income up to ₹12.75 lakh remains effectively tax-free for salaried taxpayers with ₹75,000 standard deduction.
What is the Tax Year concept introduced in the Income Tax Act 2025?
The **Income Tax Act 2025** introduces the concept of a **Tax Year** to replace the confusing dual terminology of **previous year (the year income is earned) and assessment year (the following year when tax is assessed)**. This simplification reduces confusion for taxpayers, accountants, and courts.
When did the Income Tax Act 2025 receive Presidential assent and when does it come into effect?
The **Income Tax Act 2025 received Presidential assent on August 21 2025** and comes into effect on **April 1 2026**, replacing the 63-year-old Income Tax Act 1961. Union Budget 2026-27 confirmed its implementation as part of India's effort to modernize and simplify the direct tax framework.
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