Last reviewed: 25 September 2026. One of the most visible changes in the Income-tax Act, 2025 is also one of the simplest: the confusing pair of 'previous year' and 'assessment year' is gone, replaced by a single 'Tax Year'. This guide explains what the Tax Year is, why it was introduced, from when it applies, and what it means in practice. For the wider picture of what changed between the two Acts, see Part 1: major changes, 1961 vs 2025.
At a glance
The old confusion
Under the 1961 Act, income earned in a previous year was taxed in the following assessment year - two different financial years for the same income. This routinely confused taxpayers, who mixed up which year to quote on forms and challans.
The new single Tax Year
The 2025 Act replaces both with one Tax Year that matches the financial year. The definition sits in section 3 of the Income-tax Act, 2025: the tax year is the twelve-month period of the financial year beginning on 1 April. Income earned in April 2026 to March 2027 is simply Tax Year 2026-27. The term 'assessment year' is discontinued, and you refer to income by its Tax Year.
Side by side: which year, which Act
| Income earned | How the year is described | Governing Act | Return |
|---|---|---|---|
| 1 April 2025 to 31 March 2026 | Previous year 2025-26 / Assessment year 2026-27 | Income-tax Act, 1961 | Filed in 2026 on the old ITR forms (31 July 2026 for most individuals; later dates for business and audit cases) |
| 1 April 2026 to 31 March 2027 | Tax Year 2026-27 | Income-tax Act, 2025 | Filed in 2027 under the new Act |
New business or new source of income
Section 3 also covers a business or profession newly set up, or a source of income newly coming into existence, during a financial year. In that case the first tax year starts on the date of setting up (or the date the new source comes into existence) and ends on 31 March of that financial year. A company incorporated in October 2026, for example, has a first tax year from its start date to 31 March 2027.
What it means in practice
The compliance rhythm - advance tax instalments, TDS, return filing - continues in substance; what changes is the terminology and how you label the year. For older years up to FY 2025-26, the previous-year/assessment-year framework of the 1961 Act still applies. Use the terminology that matches the law in force for the period you are dealing with. For forms, due dates and regime choices for this filing season, see the ITR filing hub for AY 2026-27.
Frequently asked questions
What is the 'Tax Year' under the Income-tax Act, 2025?
The Tax Year is a single twelve-month period aligned with the financial year (April to March). It replaces the old system of a 'previous year' (when income is earned) and an 'assessment year' (when it is taxed).
Why was the change made?
Because using two different years - previous year and assessment year - confused taxpayers, who often mixed them up. Aligning everything to one Tax Year removes that confusion.
From when does the Tax Year apply?
From 1 April 2026. Income earned during FY 2026-27 is referred to as Tax Year 2026-27 under the new Act.
Is the assessment year concept gone?
Under the new Act, yes - the term 'assessment year' is discontinued, and income is simply referred to by its Tax Year.
Does this change when I pay tax or file returns?
The timing of advance tax, TDS and return filing continues in substance; what changes is the terminology and references. You will describe the year differently, but the compliance rhythm remains familiar.
How does this affect older years?
Years up to FY 2025-26 continue to use the previous-year and assessment-year framework of the 1961 Act. The Tax Year applies going forward from FY 2026-27.
Will forms and portals use the new term?
Forms, utilities and references are being updated to the Tax Year concept for periods under the new Act. Use the terminology matching the law in force for the relevant period.
Is this just a name change?
Largely yes in effect - it is a clarity and simplification measure. The substance of how income is earned and taxed is unchanged; the labelling is simpler.
We help you and your team apply the new Act's concepts correctly across your filings.
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