Last reviewed: 25 September 2026. Since 1 April 2026, India has been running two direct-tax rulebooks side by side: the Income-tax Act, 1961, for FY 2025-26 and every year before it, and the Income-tax Act, 2025, for FY 2026-27 onward. Five months into that transition, the same handful of questions keeps coming up in our client conversations — what actually changed, where did familiar sections like 194C and 44AD go, and what do we need to fix in our systems before the next filing. This guide pulls together the full picture in one place: the structure, the new regime, presumptive taxation, the Section 393 TDS consolidation, the new Form 141, and a practical transition checklist — with links to our detailed part-by-part series wherever you want the fuller treatment of a single topic.
At a glance
- Why India got a new Income-tax Act
- Structure at a glance: 1961 Act vs 2025 Act
- The new "Tax Year" replaces previous year / assessment year
- New tax regime under Section 202: slabs, rebate, standard deduction
- Presumptive taxation under Section 58
- TDS moves into Section 393 — the table structure
- TDS thresholds that apply for FY 2026-27 (carried over from Finance Act 2025)
- Form 141 and the renumbered TDS/certificate forms
- Transition checklist for your business
- Frequently asked questions
Why India got a new Income-tax Act
The Income-tax Act, 1961 ran for over six decades and accumulated hundreds of amendments, provisos, explanations and cross-references along the way — useful case law built up around it, but it also became genuinely difficult to navigate, even for professionals. The Income-tax Act, 2025 is primarily a simplification and consolidation exercise: shorter sentences, more use of tables instead of dense provisos, and a leaner section count. It is not, by itself, a tax-rate change — rates, rebates, slabs and thresholds continue to be set and revised through the annual Finance Act, exactly as before.
For a fuller walk-through of the headline changes, see Part 1 of our series: Income-tax Act, 2025 — Major Changes from the 1961 Act.
Structure at a glance: 1961 Act vs 2025 Act
| Feature | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Approximate section count | More than 800 (commonly quoted as 819 effective sections), plus provisos, explanations and sub-clauses | ~536, restructured with tables |
| Period terminology | "Previous year" + "assessment year" | Single "Tax Year" |
| TDS provisions | Scattered 192–206 series sections | Consolidated in Section 393 (tables in sub-sections (1) to (4)); TCS in Section 394 |
| Presumptive taxation | Sections 44AD, 44ADA, 44AE | Section 58 (schemes restated, limits carried forward) |
| Default regime | New regime (115BAC) default from AY 2024-25 | New regime (Section 202) continues as default |
| Applicability | Governs FY 2025-26 (AY 2026-27) and all earlier years | Governs FY 2026-27 (Tax Year 2026-27) onward |
The new "Tax Year" replaces previous year / assessment year
Under the 1961 Act, income earned in a "previous year" was assessed in the following "assessment year" — two different labels for the same income, which routinely confused taxpayers filling in forms and challans. The 2025 Act replaces both with a single Tax Year aligned to the financial year: income earned between April 2026 and March 2027 is simply Tax Year 2026-27. The compliance rhythm — advance-tax instalments, TDS timing, return filing deadlines — continues in substance; only the label changes, and only for periods governed by the new Act. Full detail: Income-tax Act, 2025 — Tax Year vs Assessment Year Explained.
New tax regime under Section 202: slabs, rebate, standard deduction
The new tax regime remains the default under Section 202 of the 2025 Act, carrying forward the current slab structure and the enhanced rebate under section 156(2) (old 87A).
| Taxable income slab | Rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 – 8,00,000 | 5% |
| Rs 8,00,001 – 12,00,000 | 10% |
| Rs 12,00,001 – 16,00,000 | 15% |
| Rs 16,00,001 – 20,00,000 | 20% |
| Rs 20,00,001 – 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
With the enhanced rebate, tax works out to nil up to Rs 12,00,000 of taxable income, and the Rs 75,000 standard deduction takes the effective tax-free salary to roughly Rs 12.75 lakh for salaried taxpayers. A 4% health and education cess applies on the computed tax, and surcharge kicks in at higher income levels. Salaried individuals can pick either regime each year; anyone with business or professional income who wants the old regime must file the prescribed option form (Form 10-IEA under the 1961 Rules; confirm its number under the Income-tax Rules, 2026 on the e-filing portal before filing), and switching back afterwards is restricted.
Ms Ananya, salaried, gross salary Rs 18,00,000 for FY 2026-27, new regime (default).
Taxable salary after the Rs 75,000 standard deduction = Rs 17,25,000.
| Slab | Amount in slab | Rate | Tax |
|---|---|---|---|
| 0 – 4,00,000 | 4,00,000 | Nil | 0 |
| 4,00,001 – 8,00,000 | 4,00,000 | 5% | 20,000 |
| 8,00,001 – 12,00,000 | 4,00,000 | 10% | 40,000 |
| 12,00,001 – 16,00,000 | 4,00,000 | 15% | 60,000 |
| 16,00,001 – 17,25,000 | 1,25,000 | 20% | 25,000 |
Tax before cess = Rs 1,45,000. Add 4% cess (Rs 5,800) = Rs 1,50,800 payable. The section 156(2) rebate (old 87A) does not apply here because taxable income exceeds Rs 12,00,000 — had her taxable income been Rs 12,00,000 or below, the tax would have been reduced to nil by the rebate.
Presumptive taxation under Section 58
Sections 44AD, 44ADA and 44AE of the 1961 Act are restated as Section 58 of the new Act (old 44AD/44ADA/44AE) — the schemes, rates and limits carry forward largely unchanged, and the 5-year bar after opting out of the business scheme sits in section 58(7) (old 44AD(4)).
| Scheme | Deemed income | Eligibility limit |
|---|---|---|
| Business | 8% of turnover (6% for banking/digital receipts) | Turnover up to Rs 2 crore (Rs 3 crore if cash receipts stay within 5%) |
| Profession | 50% of gross receipts | Receipts up to Rs 50 lakh (Rs 75 lakh under the same 5% cash condition) |
| Transport (goods carriage) | Prescribed amount per vehicle | Based on number of vehicles owned |
No detailed books or tax audit are required while a taxpayer stays within these limits and declares income at or above the deemed rate. Declaring a lower profit while total income exceeds the basic exemption can trigger a full books-and-audit requirement, so the scheme suits taxpayers whose real margins are reasonably close to the deemed rate. Full detail: Income-tax Act, 2025 — Presumptive Taxation (Section 58) Explained.
Mr Karan, freelance management consultant, gross professional receipts Rs 46,00,000 for FY 2026-27, entirely through banking channels.
Receipts are within the Rs 50 lakh limit for the professional scheme, so he can opt for Section 58 presumptive taxation: deemed income = 50% of Rs 46,00,000 = Rs 23,00,000. He files ITR-4 without maintaining detailed books. If his actual expenses are high enough that his real profit is materially below Rs 23,00,000 and he wants to declare that lower figure, he moves to ITR-3 with regular books, and — since his income would then exceed the basic exemption — a tax audit under section 63 (old 44AB) becomes relevant.
TDS moves into Section 393 — the table structure
This is the change that affects the widest range of businesses day to day. The scattered 192–206 series TDS sections of the 1961 Act are consolidated: salary TDS sits in Section 392, and most other TDS sits in a single Section 393, organised as tables in sub-sections (1) to (4). The table in sub-section (1) alone groups commission and brokerage, rent (on plant and machinery, and on land and building), transfer of immovable property and joint-development agreements, income from capital-market instruments, interest (on securities, bank, co-operative and post-office deposits, and other interest), contractor and professional/technical payments, dividend, and a residual "other cases" bucket covering life-insurance payouts, purchase of goods, senior-citizen interest and business perquisites. Sub-section (2) covers payments to non-residents, sub-section (3) items such as lottery winnings, online games and payments to partners, and sub-section (4) the cases where no deduction is required. TCS is not in Section 393 at all; it sits separately in Section 394.
Practically, this means the economic substance of familiar deductions — contractor payments (194C), professional/technical fees (194J), purchase of goods (194Q), rent (194-I/194-IB), property purchase (194-IA), brokerage (194H), interest (194A) — is retained; what changes is that they now sit as line items within Section 393's tables rather than as standalone numbered sections, and the thresholds raised by the Finance Act 2025 from 1 April 2025 carry over (see the next section). Practitioners in practice still refer to payments by their old 194-series names for clarity while quoting Section 393 on the return or challan. Full detail: TDS under the Income-tax Act, 2025 — Mapping Old Sections to New.
Quick illustration: a Rs 45,000 professional fee paid in FY 2026-27 needs no TDS under section 393(1) Table S.No. 6(iii) (old 194J); the Rs 50,000 threshold has applied since 1 April 2025.
TDS thresholds that apply for FY 2026-27 (carried over from Finance Act 2025)
The thresholds below apply within Section 393 for FY 2026-27, but they are not new: the increases took effect on 1 April 2025 (FY 2025-26) under the Finance Act 2025 and were carried into the new Act. They still matter to a bookkeeping team more than the section-number change itself, because they decide whether TDS applies at all on a given payment.
| Nature of payment | Up to FY 2024-25 | From 1 April 2025 (applies for FY 2026-27) |
|---|---|---|
| Dividend (194) | Rs 5,000 | Rs 10,000 |
| Interest other than on securities, non-bank (194A) | Rs 5,000 | Rs 10,000 |
| Bank/co-op/post-office interest to senior citizens (194A) | Rs 50,000 | Rs 1,00,000 |
| Insurance commission (194D) | Rs 15,000 | Rs 20,000 |
| Lottery/crossword commission (194G) | Rs 15,000 | Rs 20,000 |
| Brokerage/commission (194H) | Rs 15,000 | Rs 20,000 |
| Professional and technical fees / royalty (194J) | Rs 30,000 | Rs 50,000 |
| Income from mutual fund units (194K) | Rs 5,000 | Rs 10,000 |
| Compensation on compulsory acquisition of land (194LA) | Rs 2,50,000 | Rs 5,00,000 |
Rent continues at a Rs 50,000-a-month threshold, applied on a per-month basis since 1 April 2025 rather than an annual aggregate — so a rent payment that crosses Rs 50,000 in any single month attracts TDS from that month. The rate is 10% for land/building and 2% for plant and machinery under section 393(1) Table S.No. 2(ii) (old 194-I), and 2% where the payer is an individual or HUF under Table S.No. 2(i) (old 194-IB). TDS on partner remuneration (old Section 194T, now section 393(3) Table S.No. 7), introduced from FY 2025-26, continues into the new framework at 10% on aggregate payments exceeding Rs 20,000 per partner per year.
Form 141 and the renumbered TDS/certificate forms
Four separate PAN-based challan-cum-statements — Form 26QB, 26QC, 26QD and 26QE — are merged into a single Form 141 from FY 2026-27, split into schedules by transaction type:
- Schedule A — TDS on rent exceeding Rs 50,000 a month (erstwhile 26QC).
- Schedule B — TDS on transfer of immovable property of Rs 50 lakh or more (erstwhile 26QB).
- Schedule C — TDS on contract, professional, commission or brokerage payments above the specified limit (erstwhile 26QD).
- Schedule D — TDS on transfer of a virtual digital asset (erstwhile 26QE).
The quarterly TDS/TCS statements and the non-salary TDS certificate are also being renumbered as part of the same exercise — commonly referenced as Form 140 (in place of 26Q), Form 144 (in place of 27Q) and Form 131 (in place of the non-salary certificate, Form 16A) in current practitioner material. Treat these three as directionally correct but always worth confirming against the live e-filing portal or TRACES label before quoting them on a client filing, since portal labelling has visibly lagged the notified law during this transition.
Transition checklist for your business
For the notified rules and form-mapping detail behind this checklist, see Income-tax Act, 2025 — New Rules and Form Mapping.
Frequently asked questions
When does the Income-tax Act, 2025 actually apply from, and does it wipe out the 1961 Act overnight?
The 2025 Act comes into force on 1 April 2026 and applies from FY 2026-27 onwards. Income of FY 2025-26 (AY 2026-27) and every year before it stays governed by the Income-tax Act, 1961, and transitional provisions let pending assessments, appeals and proceedings under the old Act continue without a break.
Is the Income-tax Act, 1961 completely dead now?
It is repealed for fresh applicability from 1 April 2026, but it does not disappear from practice. Every return, notice, assessment or appeal relating to FY 2025-26 or an earlier year is still decided under the 1961 Act, so practitioners will be working with both codes side by side for several years.
How many sections does the new Act have, and does a leaner Act mean lower tax?
The 2025 Act runs to roughly 536 sections against the more than 800 sections (commonly quoted as 819 effective sections), plus provisos and explanations, that the 1961 Act had accumulated. This is a drafting and structural simplification, not a tax cut — rates, rebates and thresholds are set separately through the Finance Act and continue to change through the Budget process, not through this recodification.
What is the single biggest everyday change for a typical taxpayer or business?
Two things: the 'Tax Year' replaces the old 'previous year' / 'assessment year' pair, and TDS provisions that used to sit under scattered 194-series sections are now consolidated into Section 393's table structure. Neither changes what you owe; both change how you reference and file it.
Is the new tax regime compulsory under the 2025 Act?
No. The new regime (Section 202) continues as the default, but you can still choose the old regime where eligible. Salaried individuals can pick either regime each year at the time of filing; anyone with business or professional income must file the prescribed option form (Form 10-IEA under the 1961 Rules; confirm its number under the Income-tax Rules, 2026 on the e-filing portal) to opt for the old regime, and switching back afterwards is restricted.
Where did the presumptive taxation sections 44AD and 44ADA go?
They are restated as Section 58 of the 2025 Act (old 44AD/44ADA/44AE), with the 5-year bar after opting out of the business scheme in section 58(7) (old 44AD(4)). The business scheme (8% of turnover, 6% for digital receipts, up to Rs 2 crore turnover or Rs 3 crore where cash receipts stay within 5%) and the professional scheme (50% of gross receipts, up to Rs 50 lakh or Rs 75 lakh under the same cash condition) carry forward with their rates and limits intact.
What happened to familiar TDS sections like 194C, 194J and 194Q?
The underlying deductions — contractor payments, professional and technical fees, purchase of goods and the rest — continue in substance, but TDS is now consolidated in section 393, in tables in sub-sections (1) to (4), instead of standing as separate numbered sections; TCS sits separately in section 394. Practitioners are, in practice, continuing to refer to payments by their old 194-series names even while quoting Section 393 on the challan or return.
Are the 26QB, 26QC, 26QD and 26QE forms gone?
Yes. From FY 2026-27 all four are merged into a single Form 141, split into schedules for the transaction type: rent above Rs 50,000 a month, transfer of immovable property of Rs 50 lakh or more, contract/professional/commission/brokerage payments above the specified limit, and transfer of a virtual digital asset. TDS return forms and the non-salary TDS certificate are also being renumbered in the process — confirm the exact current label on the e-filing portal or TRACES before quoting it, since portal labelling has lagged the law in the past.
Did any TDS thresholds actually increase under the new framework, or is this only a renumbering exercise?
For TDS it is largely a renumbering exercise. The higher thresholds that apply for FY 2026-27 are not new: they came in with the Finance Act 2025, effective 1 April 2025 (FY 2025-26), and were carried into the new Act. Those increases took dividend and non-bank interest thresholds from Rs 5,000 to Rs 10,000, the senior-citizen bank interest threshold from Rs 50,000 to Rs 1,00,000, brokerage/commission and insurance/lottery commission thresholds from Rs 15,000 to Rs 20,000, professional and technical fees from Rs 30,000 to Rs 50,000, and compulsory land acquisition compensation from Rs 2,50,000 to Rs 5,00,000. TDS on partner remuneration (old Section 194T, now section 393(3) Table S.No. 7), introduced from FY 2025-26, also continues at 10% on aggregate payments above Rs 20,000 per partner per year.
What should our business actually do before the next TDS or payroll cycle?
Work through the transition checklist later in this guide: re-map your TDS masters to the Section 393 references and confirm the current thresholds, retire 26QB/26QC/26QD/26QE workflows in favour of Form 141, re-run the regime comparison for salaried staff, and confirm presumptive-taxation eligibility for any consultants or vendors you deal with before assuming the old limits still apply.
We map your filings, TDS masters and regime choices to the new Act and keep your team ahead of the portal changes.
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